Problems Of Trading In A Car With Outstanding Loan

Problems Of Trading In A Car With Outstanding Loan

If you are planning to trade in your current Car for a new one, then you should make sure all outstanding balance on the current Car is cleared off and that it does not cost you more than it should. Here are a few problems that occurs frequently and that could also be avoided, if you are good enough at some money and Loan management tactics.

Problems Of Trading In A Car With Outstanding Loan
Problems Of Trading In A Car With Outstanding Loan

Car Trade-In With A Pending Loan

I will elaborate this point for you with a simple example. I have a Car which still has a pending Loan of $1000 on itself. I see a new Car and I want to trade this one for that new one. The dealer trades the new Car with me for $500 but along with that he will add the leftover $500 to the new Car’s Loan and thus I end up with paying $500 for a Car which becomes my negative equity.

The Car may not be worth that $500 addition, but because I was in a hurry to get a new Car, even with Loan pending on the old one, I end up paying double the amount. Bad deal! Remember never to trade in a Car which already has a pending balance.

Know Market Value of Your Car

If you want trade in with a good price offer, it is imperative that you know the cost of your Car. Sometimes dealers want to get a low offer and if you don’t know the value of your current Car, you could end up loosing quite an amount over it. Check out websites, current Car ratings, its models, its price value online and you will at once be aware of the current market value.

Be Responsible

Remember that when the dealer takes over your Car Loan, you still have to pay him the monthly amount. Keep track of this by getting bills, receipt of payments and keep them safe until the Loan balance is paid off. If you don’t keep knowledge of where your money is going, you could get defaults on your credit report, without even knowing about it. Always check after three days of posting the payment, whether it has been received or not.

These are the steps to follow:

  • Find out how much your vehicle owes you. Find out the “payoff amount”, which is what your lender will give you. This is the amount that it will cost to repay your existing Loan. It may differ from any balance on your statement. The prepayment penalty or how interest is calculated could cause this difference.
  • You should research the value of your trade in to determine if it is still worth what you owe. Also, ensure that you negotiate fair terms for your trade-in so you can fully repay the Auto Loan.
  • Make a decision about whether you want to pay off the existing Loan immediately. If you wait until your old Loan is paid off before you borrow money for another vehicle.
  • You could end up paying more for your vehicle than you are worth, and roll the remaining balance from your Auto Loan into the new Loan. This could increase the cost of the Auto Loan. Because you are borrowing more than the cost of your vehicle, your total Loan cost could be higher.

You can roll over the remaining balance from your Auto Loan to your new Loan.

  • To confirm that your Loan is paid off, contact your lender.
  • Within a week, you will be able to use the contact information for confirmation that your Loan is paid off.
  • Contact the lender if your Loan is still unpaid. If your Loan is still unpaid after all reasonable efforts, you might consider submitting a complaint online to the Federal Trade Commission, the CFPB or to the CFPB by calling (855) 411-2372. You can also share your experiences with us without having to file a formal complaint. You can also reach your state attorney General.

Tip Determine the value of your trade-in to determine if you owe more than you are worth. This will help you decide if you are receiving fair value for the trade-in, and if you are able pay off your old Auto Loan fully. You will still be responsible for the amount you owe on your vehicle even if your dealer offers you more than you are willing to pay. It is worth considering whether you should make the purchase. In this situation, your new Loan will cover the amount that you owe on your vehicle as well as the amount that you borrowed for the vehicle. Before you sign anything, make sure to understand the total costs, the monthly payments, as well as the Loan term (in terms of months).