Using a Personal Loan to Pay Off Your Car
It’s easy to get in over your head when buying a new car. Some car salespeople are eager to sell you any car you want so they can earn a commission. Sometimes, that means you may end up buying a car that is out of your budget. Sadly, when you drive a new car off the lot, you could easily owe more than the car is worth thanks to instant depreciation. Fortunately, you can sell a car you’re underwater on by using a personal loan to pay off an upside down car loan. Here’s how it works.
Figure Out the Value of Your Car
One of the hardest parts of selling a car you are upside down on is coming to the realization that you car isn’t worth what you still owe on it. The best way to objectively determine your car’s current value is to visit a car value estimator such as KBB.com. You’ll need to enter your car year, make, model, mileage, options and car condition to get an accurate quote. You will also need to decide if you’ll be trading your car in or selling it to a private party. Usually, selling to a private party will result in a higher sales price, which would result in a smaller personal loan balance. Make sure to be completely truthful when entering information about your car to get the most accurate value, especially when it comes to condition. You’ll only be hurting yourself by estimating a value higher than the true worth as it may take much longer to sell your car.
Determine How Upside Down You Are
Next, you’ll need to determine how much owe on your car. Take a look at your most recent car loan statement to find your balance owed. To determine how upside down you are on your car, you’ll take the car value you calculated earlier and subtract your car loan balance. If the result is a negative number, you’re officially upside down on your car loan by the amount of the negative number.
How to Sell Your Upside Down Car
While being upside down on your car loan isn’t something to be proud about, you can still sell your car. In order to sell your car, you’ll have to pay your original car loan off in full so you can give a clean car title to the new owner. The problem is, the person you’re selling the car to won’t be giving you enough money to pay the loan off in full. You would have to have extra cash you’re willing to put toward the payoff to complete the sale.
Unfortunately, if you don’t have the cash, you’re going to have to borrow money to complete the car sale. One option is to take out a personal loan to pay off an upside down car loan. The good news is, the debt should be less than the amount you owed on the car loan. In fact, you could only owe the amount you calculated when determining how upside down you are. The smaller personal loan debt could be much less burdensome in many cases and, with some effort, you may be able to pay it off faster than you could pay off your old car loan, too. After you take out a personal loan, apply the money you borrowed to your car loan balance. Then, when you get the proceeds from the sale, you can finish paying off your car loan and be free of your upside down car.
What to Look for When Taking Out a Personal Loan
Finding a personal loan can seem challenging, but there are ways to make the process much easier. You can compare multiple personal loan offers with just one application on LendingTree.com. When considering your offers, make sure to consider the interest rates offered, the term of the loan, the monthly payment and any fees that may apply. Once you’re done reviewing the offers, pick the loan that is best for you and get rid of that upside down car.