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Do I have to pay off my loan before I get a new car?
I want to get a new car, but I still have a loan on my current car. Do I need to pay this loan off first before I get a new car loan?
Eric Schad · Updated on
Reviewed by Shannon Martin, Licensed Insurance Agent.
No, you do not have to pay off your
car loan
before you get another car loan. Instead, you have a few other options.If you have positive equity, or you owe less on the loan than the car is worth, you can trade in or
sell the car
. Then, you can use the proceeds to pay off the remainder of the loan and use the leftover money to make a down payment
or throw it in a savings account.If you have negative equity, or you’re
upside down on the car loan
, it becomes a bit trickier. Even if you sell the car or trade it in, you will still have a balance on the car loan. You’ll be responsible for paying this no matter what. So you essentially have three options:- Pay the remaining balance out of pocket
- Get a small loan to pay off the old loan (if you don’t have the cash)
- Roll the old loan into the new loan
Keep in mind that you will need to maintain full coverage car insurance as a stipulation of your loan, so use the
Jerry
app to help you find the best deals. Jerry compares personalized quotes from more than 50 top insurance companies, including Nationwide, Allstate, and Travelers, and delivers the best deals to your phone in minutes for free. The average Jerry driver saves $879 a year on car insurance!View full answer
- Gregory R.
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Jerry partners with more than 50 insurance companies, but our content is independently researched, written, and fact-checked by our team of editors and agents. We aren’t paid for reviews or other content.
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