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Should I Flip My Car Right Side Up With a Credit Card?

Aug. 4, 2014
Auto Loans, Credit Cards
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If your car is upside down, you may want to flip it right side up with a credit card. This sounds like an impossible feat, but an “upside-down car” means that a loan balance is higher than the car’s current value. Flipping it right side up would be paying down the loan until the value is higher.

With on-time monthly payments, eventually your car will flip right side up on its own. But what if you want to sell it? In that case, you may want to consider a balance transfer credit card.

Why would I need to flip my car?

Flipping your car right side up is generally only necessary when you want to sell it. Whether you’re going carless or want to buy a different car — probably a cheaper vehicle — you’ll likely need to do something about the difference between the car value and the loan balance. It’s not a good idea to keep the loan open while transferring the car to someone else, so avoid that route.

It isn’t ideal to have an upside-down car at any time, but it is less of an issue when you’re keeping your car for the long haul. After all, car loans are on a fixed payment schedule that will eventually pay off your car in full. So if your car is upside down by $1,000 or so, but you don’t plan on selling it, you really don’t need to sweat it.

Shouldn’t I just pay the loan down until it’s right side up?

You can always pay down your loan until it’s right side up and then sell your car, but there is a major flaw with this plan. It will cost you more! You’ll continue to pay interest on your loan, as well as transportation expenses such as insurance, parking and maintenance. Your car’s value is also likely to drop each month, especially if your vehicle is one to three years old.

What are the benefits of using a balance transfer card?

You could use a number of different options to pay off the upside-down part of your loan, including peer-to-peer (P2P) or personal loans, rolling the loan into a new car purchase from a dealership or taking out a line of credit. However, the best option is generally a balance transfer credit card. Here’s why:

  • It’s easy! Getting a balance transfer card is quick and easy. Upon applying, you’ll be asked to provide account information for the part of the loan you’re transferring, and the credit card company will send the check out for you.

  • You’ll enjoy 0% interest for approximately 12 to 18 months. There are balance transfer cards that charge interest from the start, but you can find plenty of cards with a 0% introductory rate. Of course, you should pay off the entire balance before the rate expires.

What is the value of my car?

You’ll need to know how much your car is worth, in order to know how much to transfer to a credit card. Kelley Blue Book is a good start, but it’s unlikely that you’ll get that amount from a dealership. You may be able to get it from an individual buyer, but it’s best to err on the side of caution. Add $1,000 to the balance transfer amount to cover your bases, unless you have the cash reserves to cover it.

Bottom line: If you want to sell your car for any reason, but it’s upside down, you need to flip it before you sell. Due to its ease and 0% interest rate, the best option may be a balance transfer credit card. Estimate the value of your car, add $1,000 to it, and apply for a balance transfer in that amount. Then flip that car right side up and sell it!

Man driving car image via Shutterstock