How to Refinance Your Reverse Car Loan (2022 Guide)


Since most cars depreciate quickly after purchase, you could end up with an upside-down car loan. Your options for getting on the safe side include paying off the negative equity, trading in your vehicle, or refinancing your car loan upside down. The choice will ultimately depend on whether you want to keep your car or your money.

We at the Home Media Appraisal Team will explain what a reverse car loan is, how it works and how to refinance it. We will also recommend lenders who offer the best auto refinance rates for 2022.

What is a Reverse Auto Loan?

A reverse car loan occurs when you owe more money on the loan than your vehicle is worth. For example, your car loan would be upside down if the value of your vehicle was $15,000 but your loan balance was $20,000. In this case, you would have negative equity of $5,000.

Having an upside down car loan doesn’t have to be stressful. Drivers who plan to keep their car can make regular monthly payments on their loans until they are paid off. Nothing changes with the lender. But if you want to be on the right track with your loan, you’ll have to decide whether to pay it off over time or in a lump sum, refinance, or trade in your vehicle.

Steps to refinance your reverse car loan

One of the best options for getting out of a reverse car loan is to refinance your current loan. It can also help lower your interest rate and monthly car payment.

Below, we’ll provide you with detailed information on the steps you need to take to be positive about your reverse car loan and get car loan refinancing.

Step 1: Calculate the amount of negative equity on your loan

The first step in refinancing your reverse car loan is to understand the amount of negative equity. To do this, you will need to calculate the value of your car and the amount remaining on your loan. You can find your car’s trade-in and private sale values ​​on sites like Kelley Blue Book or Edmunds.

To see how much you owe on your car, log into your loan account or call your lender to request the repayment amount.

Step 2: Talk to your lender

Before applying for auto loan refinance, contact your lender to see if they charge prepayment penalties and if they offer options to help you combat negative equity in your auto loan. Your lender may allow you to make more frequent payments or earmark your principal payments. The overall goal would be to reduce negative equity and help you repay your loan faster.

Step 3: Check auto refinance rates

If your lender is unable to help you with your reversed auto loan, consider auto refinancing if you have good credit. This could help you get a new car loan with a lower interest rate and monthly payment, allowing you to pay off negative equity faster.

You can start by contacting your bank or credit union to see if you would qualify for automatic refinancing based on your financial situation and remaining loan balance. After that, talk to a few third-party lenders to assess interest rates and find the best deal.

Step 4: Get a new loan

Once your research is complete and you decide that automatic refinancing is the best option for you, sign up for the new loan you have chosen. Most lenders will leave their offers valid for up to 60 days, so you have until then to decide.

Those opting against automatic refinancing or who do not qualify still have other options. These include:

  • Pay off your current car loan in a lump sum
  • Repay your loan over time
  • Sell ​​your vehicle to an individual
  • Swap their car for
  • Cancellation of add-ons

How Upside Down Car Loans Happen

Reverse car loans occur frequently due to the terms chosen when buying a new car. Here are some of the most common reasons:

Little or no down payment

Your vehicle loses value once you take it out of the lot, which instantly results in an upside-down car loan if you haven’t put money aside. With no down payment, you also finance taxes, license, registration and dealership fees. This can make your amount financed greater than the value of the vehicle.

A longer loan term

When you buy a car, the dealer may offer you a longer loan term. Choosing a longer-term loan spreads out your loan repayments, causing your vehicle to lose value faster than you can pay off what you owe. With long-term options like a 84 month car loanyou’ll also pay more interest than you would with shorter terms.

Overpriced cars

Buy similar makes and models from different dealers to find the best deal. If you buy your car at the earliest opportunity without doing the research, you could end up paying more than it’s worth.

Unnecessary supplements

Dealerships may offer add-ons when you purchase your vehicle, such as extended warranties, gap insurance and appearance packages. Every additional purchase you make takes away money that you could be spending on paying off your car loan.

Our recommendations for auto loan refinancing

Automatic refinancing can help you get a shorter loan term and a lower rate. When we conducted our industry-wide search for the best auto refinance rates for 2022, myAutoloan and Auto Approve stood out above others in the industry. We recommend that you contact these reputable and reputable companies to see what options are available to refinance your reversed car loan.

MyAutoloan: best low rate option

Unlike many others in the industry, myAutoloan operates as an online marketplace that allows you to compare lender offers in one place. Borrowers with good credit can find annual percentage rates (APR) for auto loan refinance as low as 1.99% for a loan term of 36 months or less. The lending platform also provides services for people with less than ideal credit, allowing borrowers with FICO credit scores of 575 and above to apply for refinancing.

The company has a A+ rating and Better Business Bureau (BBB) ​​accreditation. Trustpilot customers grant myAutoloan a 4.2 star rating out of 5.0.

Read more: myAutoloan review

Automatic approval: first choice for refinancing

Auto Approve is an industry leader in auto loan refinancing. With its extensive network of lenders, it provides refinancing for cars, trucks and SUVs, as well as motorcycles, ATVs, boats and RVs. Borrowers with good credit may qualify for APRs as low as 2.25%.

Auto Approve has an excellent reputation as a financial institution. The company is accredited by the BBB and has a A+ rating organisation.

Read more: Automatic Approval Review

Our Methodology

Because consumers rely on us to provide unbiased and accurate information, we’ve created a comprehensive rating system to formulate our ranking of the best car loan companies. We’ve collected data on dozens of loan providers to score companies on a wide range of ranking factors. The end result was an overall score for each vendor, with the companies scoring the most points at the top of the list.

Here are the factors taken into account by our assessments:

  • Reputation (30% of total score): Our research team considered ratings from industry experts and each lender’s years in business to assign this rating.
  • Availability (20% of total score): Companies that cover a variety of circumstances are more likely to meet the needs of borrowers.
  • Loan details (15% of total score): We considered the loan types, terms and loan amounts available from each lender to determine this score.
  • Prices (25% of the total score): Auto loan providers with low APRs scored highest in this category. Available discounts have also been taken into account.
  • Customer experience (10% of total score): This score is based on customer satisfaction ratings and transparency. We also considered the responsiveness and helpfulness of each lender’s customer service team.

*Data correct at time of publication.


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