You probably didn’t buy your car expecting its value to end up lower than what you owe on the loan. But it happens and it’s a common reason to get your auto loan modified.
There are a couple reasons this can happen.
- Accidents. Through no fault of your own, an accident can change the value of the car in a hurry.
- Bad Financing. You may have been roped into some financing that never gave you a chance. Some longer term loans on used cars can often linger for too long and eventually the car is devalued enough that you can’t sell it for what you still owe. On top of that, there are creative financing methods or high interest rates that can sabotage your ability to pay down the loan as fast as the car is depreciating.
What to do
Your car losing its value so much that you owe more than it’s worth will not in itself qualify you for a loan modification, but it’s a good start, especially if the reason why it happened is compelling to the lender.
You should speak with a professional that can help you put together your case. Things like your financial situation and hardship will factor heavily into your qualification.
Of course, you can always hold onto the car until it’s paid off, but that would require paying a lot more for the car than would ever be financially prudent. A loan modification offers the right option when your car simply isn’t worth keeping.
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