MORE REASONS TO BUY GAP INSURANCE
Posted on: Sep. 20, 2017 in Car Loans, Auto Insurance

Yesterday, we talked about GAP insurance and why you might need it. In any situation where you owe more than your car is worth can be one where you’ll benefit from GAP insurance. If your car is totaled or is stolen but the amount you’d get from insurance won’t cover the loan, what would you do? You’d not only have to gather up funds to get yourself a new car, but you’d still have to pay off the old one you don’t even have anymore (or isn’t drivable).

GAP insurance covers that difference when you’re underwater or upside down on your auto loan. Buying this insurance is a great way to protect yourself. However, there are some scenarios that are more likely to leave you in the position of needing GAP insurance.

Let’s explore some scenarios that are more likely to leave you underwater.

  • You drive too much. One quick way to drive down the value of your car is to pile on the miles. If the value keeps going down faster than you can pay down the loan, you’ll remain upside down on the loan. Obviously, you didn’t buy the car not to drive it, but being mindful of what you’re doing to it can help keep the value up.
  • You don’t care for the car. You spent a lot of money on your car (or you at least borrowed a lot for it), treat it like the valuable possession it is. Lock it when you’re not in it, perform routine maintenance, and clean it regularly. Your car has a better chance of outlasting the loan if you work to maintain it and keep it safe.
  • You didn’t put money down. The larger your down payment when you first buy the car, the more of the car you own. Borrowing more to get the car can leave you owing more than it’s worth much longer. Even if the lender or dealer doesn’t require to leave much down, the more of a down payment you come up with, the better.
  • Your loan term is too long. One way to make monthly payments smaller is to stretch out the length of the loan. While this may be helpful for your short-term budgeting, it may be quite harmful in the long term. You run a bigger risk of having negative equity, another fancy way to say you owe more than the value of the car.

Being smart from the start about what kind of car you buy, how much you can put down up front, and how quickly you can pay it off, can help you avoid being upside down on your loan. But for those times when you can’t avoid negative equity, GAP insurance can help!

If you’re ready for a new car but your credit is keeping you from getting approved, CreditYes can help with our bad credit auto loan program! We can match you with a dealership in your area that will be with you every step of the way. Our service is fast and free. Fill out our secure online application and get behind the wheel of your next car today!



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