When you make the choice to finance a vehicle, you run the risk of that vehicle flipping upside down. And by upside down, I don’t mean wheels up -- I mean when you owe more than the car is worth.
I purchased my car over a year ago with the intention of keeping it for the long haul. As such, I agreed to purchase the extended warranty (Mistake #1). I also made the decision to not put any money down (Mistake #2). Now I’m dealing with an upside down car I no longer want, as I live in a new city that doesn’t require owning a vehicle.
So what do you do if you’re in this predicament?
If You Want to Sell It
If you are trying to get rid of your vehicle, you want to flip the car right side up as soon as possible. Provided you have room in your budget, you could concentrate on this debt by putting all extra funds towards the car.
If you don’t have room in your budget, or aren’t able to pay it down quickly enough, you can take out a low interest loan from your local credit union or do a credit card balance transfer to pay the loan down enough so it’s right side up. This is the route I took, with a credit card balance transfer with an APR of 0% for 15 months.
You can then sell the vehicle for its true value, getting rid of an unwanted car and even more unwanted debt.
Note: If you choose to use a balance transfer, make a plan to pay it off before the interest rate goes back up to double digits.
If You Want to Keep It
If you aren’t interested in getting rid of your car, it’s still nice to turn the car right side up in case you decide to unload it in the future. Concentrate on paying down this debt until you owe less than the car is worth.
Having an upside down vehicle limits your options, whether or not you’re ready to sell right now. Flip it right side up for peace of mind and flexibility.