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Posted in Auto Loans
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Question By
Crystalfry1989

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Would trading in our vehicle that we still owe on for a cheaper one help our credit
We still owe $20,000 on our vehicle and last night my husband and I were talking about an older vehicle that is $11,900. According to Kelly blue book our trade in value is around $15000 to $18000. IF we were to go through with this and transfer how much we would owe onto this other vehicle,, would this help or hurt our credit?

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Since you owe more than your car is worth, it wouldn´t really help your credit. You would be trading a $15,000 car for an $11,900 car but you would not be getting the difference back. You´d still be down about $5,000 

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vehicles are tricky

Since you owe more than the car is worth, when you turn it in you will be required to pay off the balance on that loan at that time. So plan on having at least $5k in cash on hand for that. Then you will need to qualify for a new loan if you are planning on financing the new car.  

I would suggest that you call a loan officer with the lender holding the note on your old car and ask him to run the numbers,  Rarely will you be able to roll over any ballance for the old car into the new loan, since used cars do not have the value as collateral to cover the extra balance from the original loan. 

As far as the effect on your score goes. You might see fluctuations in your score imediately because of the activity but overall all you would be is reducing your debt by about $5k.  You might as well take that cash you would need to pay off the old loan on a trade in and make a big fat payment on the loan and reduce your total debt that way.  A lot less hassel and basicly the same effect. 

Good luck 

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You are upside down on the one car and want to transfer what you are upside down for to another car to be MORE Upside Down. 

Will it Help your Credit No. 
Will it put you deeper into Debt?  Yes. 

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