An upside-down car loan, also known as negative equity, is a situation in which you owe more on an asset (in this case a vehicle) than it’s actually worth. Negative equity can be obtained in many ways, such as having a high interest rate or just paying more for a car than it’s actually worth. Many people have troubles in getting out of their car loan because of being upside-down. But while it’s a pain, there are some options for you to pursue.
One is to lease a new car. With this new lease, you can add the amount you still owe (known as the deficiency balance) into the low monthly payments of your lease and still not pay as much as you did before. The catch is, the only way to truly get rid of that negative equity with this idea is to make sure you will be able to pay every month and finish the full term of the lease. So if you prove to be a punctual person, then by all means, you might want to pursue this option.
Another option is that you can always go talk to the person who lent you the money. There is a possibility that the company will be willing to lower the interest rates for you or renegotiate the terms of the loan. However, this is fairly rare. Most lenders would rather repossess the vehicle than lower your interest rate.
You could also try to sell your car for how much you owe, in order to get out of paying the deficiency balance. Make sure if you do sell the car though, you sell it yourself. Selling to a dealership might not help, because the trade value of a vehicle is much lower than the retail or private party value. If you have negative equity, where you owe more for the car than it’s actually worth in retail value, you’re going to have to pull some money from elsewhere too, in order to pay off the loan.
If you know a trusted party, then you might also be able to transfer your loan to them and let them take over the payments you owe. While this might be difficult, it still might be possible to do and it will still be better than the last option.
The option that should be taken into consideration last, is to just walk away. This is known as voluntary repossession. You allow your lender to repossess the car because of your inability to make the payments. If they do decide to take the car, they will file for the money in your account balance and if you can’t pay the balance, a judgment could be put against the money that you owe.
All these ideas have proven to work for some people, and for some they haven’t. You will just have to pursue the best option listed above, given your situation, and hope for the best.