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Auto Loan and Upside-Down Loans

It is seen that one of the worst scenarios for an auto loan applicant is to get stuck in a situation in which the car has been repossessed or they have gone upside down. The former is still manageable considering the fact that the car can be acquired again after making the installment to the Credit Company or bank on time. In the case of the upside down, it is quite a downhill case considering the borrower is stuck in a very sticky situation which is hard to get out of. The thing in this scenario is that due to the high interest rate and the high cost of the car, the total money which the borrower had to pay back was quite high.

However, if even after making successful transactions for some time, the total money owed is more than the cost of the car then the situation is considered upside down. In this scenario, the cost of the car is declining faster than the payments are being made which means that the borrower can neither refinance nor trade in the car in order to break even. He/she would have to continue with the installments on a car which is soon going to lose its value and the borrower might not be able to get a decent price on it in the future.

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