Many car owners find themselves in a situation where they want to upgrade their vehicle before paying off their existing loan.
Trading in a car with a loan can be a viable option for those looking to make a change.
Before delving into the specifics of trading in a car with a loan, let's first establish a foundation by understanding the basics of car loans.
When you finance a car, you typically take out a loan from a lender to cover the purchase cost.
To trade in a car with a loan, the first step is to determine the outstanding balance on your existing loan.
Contact your lender to obtain the current payoff amount, which represents the remaining balance that needs to be cleared to satisfy the loan completely.
Equity refers to the difference between the trade-in value of your car and the outstanding loan balance.
You can pay off the negative equity out of pocket to settle the loan balance before trading in the car. This ensures a clean slate for your new vehicle purchase.
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