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Trade in can be a serious concern for bad credit consumers looking for an approval for poor credit auto loans. In our long tenure as a poor credit car service provider, we have seen many of them face difficulties while trading in a car. Since many years, Valley Auto Loans has been involved in assisting car loan shoppers get approved for the guaranteed poor credit auto loans of their choice. Our advanced service is particularly popular amongst bad credit auto loan shoppers. We run this blog with the sole objective of sharing useful tips related to different finance related problems people face in their life.
The process of appraisal plays a significant role while trading in a vehicle. This process involves determination of the cars value based on its condition, mileage, and age. In many cases, the value of the car as determined by the dealer is far less compared to the expectation of the owners. The cost of a vehicle is lowered by factors like reconditioning expenses that are not always taken into account by the owners. All consumers can refer to Kelly Blue Book or NADA values as a guide, but dealers have access to real time auction values that are much more accurate.
Trade equity is the next most important point to be considered when dealing with auto finance for poor credit. This can be defined as the difference between the value of the car and the total amount owed on the same. The appraised value and equity are the same when the amount owed for the vehicle is paid off. On the other hand, the difference between the two is the trade equity when the vehicle is not paid off. Negative trade equity comes into play when the appraised value of the vehicle is lower compared to the amount owed.
Since down payment is a mandatory requirement for most of the sub-prime auto lenders, the trade equity needs to be high enough to cover for the same. In case of low trade equity, additional cash payments can be made to make up the difference. Therefore, the total cash down payment requirement increases drastically for vehicles with negative trade equity.
Poor Credit Auto Loans and Negative Equity Trades
It is better to consider negative equity trade under specific circumstances when it leads to saving money. This is possible if the current vehicle is not covered with warranty and expensive repairs are essential. Negative equity trade may also be more profitable if the vehicle is expensive to insure and drive. It is always better to avoid trading in a car with negative trade equity unless these two situations apply to your car.
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