The amount of negative equity a borrower can refinance into a used car differs from the credit history of an individual and the value of the vehicle determined by the lender. Some borrowers may be able to refinance thousands of dollars on a used car loan, while others may have a problem financing the cost of a car without providing a down payment to increase the fairness of the proceedings.
Your credit history set the terms of your loan. Excellent borrowers can get approval for more than 120% of the value of the vehicle, while applicants with a poor record can get approval for a bit ore than 60% of value. This percentage is called the ratio of loan to value. Your potential lender will check your credit history to determine the risks that might have to lend money. The higher the credit risk, the less money you can borrow. A history of late payments, accounts payable, judgments or tax liens significantly decrease your chances of negative equity financing.
Price Car
The price you pay for your used car also affects the ratio of loan to value. If you buy a vehicle of US $ 15,000 worth of loan of US $ 18,000, you should be able to refinance this $ 3,000 in negative equity in your new loan if you assured a loan with a ratio value ratio 100% loan. If the same car costs $ 19,000, you would have to make a down payment of $ 1,000 to meet the needs of the lender's requirements for US $ 18,000 or 100 percent of the assessed value of the lender.
Solutions
Buy a car with a value greater than the selling price credit. Some vehicles, such as car rental, usually has a value of loan and a reduced price. The great used car dealers often sell cars for rent. Consider working with a vendor to handle the negative equity if you can not get approval for yourself. A knowledgeable salesperson can show the vehicles in their inventory that have a value greater credit to the selling price. The merchant uses external funding, you may also recommend a lender that offers loan to value ratio higher and based on individual credit.
Warnings
The excess amount of money you financies on your new loan will not disappear. If you can not provide a payment to cover the excess balance from your old vehicle, your negative equity will become a problem again when trying to sell or trade your vehicle. Do not extend the terms of your loan to lower your monthly payment, and you will end up paying more interest. If you can not cope with the payment of a loan to 60 months, consider paying your current loan to minimize your negative equity or consider the option of saving money to settle the payment.
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