How to Roll Negative Equity Into a Lower Interest New Car Loan

By: Shanan Miller

Rolling negative equity into a lower interest car loan isn't an option for everyone. Your overall credit history affects your loan-to-value ratio, which is a percentage of a car's bank-determined value you're approved to borrow. This percentage might be as low as 60 percent of the car's lending value or as much as 120 percent. Rolling money into a new loan might not be a possibility if your credit has suffered or hasn't improved since your original loan. If you have good credit and rates have decreased since your current loan application, you could save thousands of dollars by refinancing your loan at a lower interest rate.

Step 1

Call or visit your current lender to obtain your loan's payoff balance. Ask for the per-diem: the amount of interest added to your balance daily. When you find your new lender, you'll provide both figures for an accurate payoff amount.

Step 2

Visit potential lender websites to gauge possible rate offers. Call to confirm any advertised rates for used cars, as some lenders impose mileage or age restrictions for used car loans. Compare the offers to determine where you'd like to apply for your refinance.

Step 3

Submit a credit application to the lender of your choice, either in person or on the phone. Provide your car's year, make, model, mileage, additional features and payoff balance with your application. Discuss any paperwork requirements for your state and prepare your paperwork as necessary.

Step 4

Arrange to sign your new contracts and handle any paperwork for your state, which could include that you supply your new lender with the vehicle's title, once you're approved for your loan. Contact your insurance company to update your lien holder information and submit proof of insurance to your new lien holder.


  • If you aren't approved for the total loan amount because of the negative equity from your previous loan, the lender might ask you to provide a down payment. The down payment keeps your loan in line with your loan-to-value ratio.
  • If you can't provide a down payment and your lender requires one for a loan approval, try a different lender, or try to save for a down payment.


About the Author

Shanan Miller covers automotive and insurance topics for various websites, blogs and dealerships. She has extensive automotive experience, including auction, insurance, finance, service and management positions. Miller has worked for dealer sales events around the United States and now stays local as a sales and leasing consultant for a dealership.

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