Refinancing the Upside Down Car Loan

Cars depreciate at a rapid rate after you drive them off the lot.

Upside Down car loan

Your monthly car payment depends on the interest rate, purchase price, and length of the car loan. Many people will opt to lower their monthly payments by refinancing their vehicle with their lender. Negative equity in your vehicle complicates this refinance process as part of the loan is not secured by the vehicle’s value. Also, extending the length of your car loan increases the total amount of money you pay in interest.

 Step 1

Determine the exact value of your vehicle by consulting Kelley Blue Book or NADA Auto Guides. Most lenders use one of these two vehicle guides to determine the value of your vehicle. Both vehicle guides provide resources on the Internet for easily determining the trade-in and retail value of your vehicle.


There are lenders who refinance upside down vehicles but expect to apply to several lenders before receiving an approval.

Step 2

Contact your lender and explain your situation. Some lenders comply with hardship requests because they do not want to lose your business. Your lender may refuse to completely refinance your auto loan contract, depending on how upside-down you are in your vehicle contract.

 Step 3

Request an extension on your loan contract with your current lender. Negative equity refinancing often focuses on extending the length of your loan. This lowers your monthly payment by breaking up the total loan amount over a significant period. Typical car loan lengths stretch from 36-month loans to 60-month loans depending on the lender. Very few lenders also offer a 72-month car loan.

 Step 4

Shop around to other lenders to get the best terms for your auto loan refinancing. You may experience denials due to the negative equity on the car note. Some lenders refinance upside down vehicles but expect to apply to several lenders before receiving approval. You may suffer from a higher interest rate than your credit warrants. This higher interest rate compensates for the unsecured negative equity aspect of the refinance loan.



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