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What happens to the remaining balance of your car loan if you sell the car but you're upside-down?
"I'm upside-down on my current car loan, but I want to sell the vehicle to buy a new one.
I know that I need to take the sales proceeds and apply it to the loan, but what happens to the remaining balance on the loan?"
Eric Schad · Updated on
Reviewed by Shannon Martin, Licensed Insurance Agent.
“The remaining balance still needs to be paid. When you buy a new car with a loan, the old balance often gets rolled over into the new car loan.
However, you’re basically robbing Peter to pay Paul. You’ll still be
upside-down
in the new car loan, and with an even higher balance due to the old car loan, you might never get back on the right side.The best plan here is to at least erase the negative equity in your vehicle and reach a break-even point. Don’t roll loans over if you don’t have to.”
View full answer
- Gregory R.
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