The term upside-down is used in referring to a particular situation when it comes to getting loans and repaying loans and such cases are common with having refinanced your loan whether it be a house loan or a car loan. An upside-down load happens when you are owing more than you have to pay originally for your car loan. For an instance, your car loan is said to be upside-down if you are supposed to pay as the value of your car is $15,000 but you end up having to pay $18,000, in this case, you are said to be upside-down in your car loan payment because you now have a negative equity of $3,000. Having an upside-down situation on your car loan can be avoided and on that basis is the article directed.

  1. You must make a down payment if you will avoid the risk of upside-down in your car loan. As it may not take for your car’s depreciation to overtake your equity if you do not have a down payment or have to borrow too much money.
  2. Paying the taxes and fees that are attached to the car loan outrightly is another way of avoiding upside-down car loans. Making your taxes and fees roll over into your loan is already an invitation to having an upside-down because you are paying more than the car’s worth. That is why you should cover every additional fee with your down payment.
  3. Choosing an appropriate and reasonable car loan term, it is safe to pick a loan term that is equal to the amount of time you are expecting to keep a vehicle that is if you can afford it. This will help you reduce the total cost and help you avoid payments when your car loses its value.
  4. Choosing a car that has a slow depreciation is another escape route from having an upside-down car loan payment as some car gets to depreciate faster than others.

On a final note, as much as going upside-down may seem inevitable, especially at the start of your loan term, discussed in this article are ways by which it can be avoided or if you are not able to avoid it totally with these strategies you can cut short the time you will spend in such situation.


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