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How can I get out of $5,000 negative equity on a car loan?
"I bought a car about a year ago at 36 months for 18.9% interest, as I'd just come out of bankruptcy. My intent was to build some credit, but I've realized I'm paying nearly 50% more toward interest than the principal.
My credit score is still in the 500s and my car is worth only $3,500, but my loan balance is $8,500. Is there any way to get out of this negative equity?"
Eric Schad · Updated on
Reviewed by Shannon Martin, Licensed Insurance Agent.
“An 18.9% interest rate on a car loan is a pretty bad deal, even after emerging from bankruptcy. But since you’ve already signed on the dotted line, unfortunately there’s not much you can do.
With $5,000 of negative equity, and as a person just coming out of bankruptcy, you won’t be able to find a lender who’s willing to refinance your loan.
At this point, you just have to keep making the payments, which will boost your credit score. If your credit score improves over time, you may qualify for loan offers with more reasonable interest rates.”
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- Gregory R.
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