Can Gap Insurance Protect You From A Car Loan Catastrophe?
Cars are virtually the only means of transportation in Florida, but many Floridians have a love-hate relationship with their cars. It’s fun to watch YouTube channels about the aspirational vehicles you will probably never be able to afford, but when you see the trust fund babies on South Beach parking one such vehicle across three parking spaces, it shakes your faith in humanity. Driving an old clunker used to be a mark of frugality; everyone could tell that an unmarried person was a catch if he or she had a well-paid job but continued to drive the same old car for a decade or more. Today, Floridians, famous though we may be for our image consciousness, drive old jalopies out of economic necessity; being able to afford a new car loan is not a given, even if you have a six-figure household income. Trading in your current car might not give you much money for a down payment on a new one. Cars are a drain on your finances, but in South Florida, you can’t live without them. For ways to stop your current car or its successor from wrecking your finances, contact a Boca Raton debt lawyer.
How Does Gap Insurance Work?
Cars begin to depreciate in value as soon as you buy them and start driving them. Therefore, unless you placed a large down payment when buying your car, it is easy to end up in a situation where the payoff amount on your loan is more than the car’s resale value. This can also happen when you roll over an old auto loan into a new one.
Gap insurance coverage protects you when your car stops being usable, and ends up with a resale value of zero, while you still owe money on the loan. This can happen if your car gets totaled in an accident or stolen. In this case, the gap insurance pays the remaining balance on your loan, after the car insurance company pays you for the resale value of your car. Some car loans come with gap insurance included, and when gap insurance is not included, some lenders will provide it for an additional fee. You can also buy gap insurance directly from insurance companies.
What to Do If Your Car Loan Is a Major Source of Financial Stress
Parting ways with a car that has caused lots of trouble for your finances can stop one source of debt accumulation, but you are still responsible for the debt after the offending vehicle is gone. You can discharge this debt in chapter 7 or chapter 11 bankruptcy, but doing so will limit your options for financing a new car. Debt settlement or debt consolidation could be a better solution.
Work With a Debt Lawyer About Protecting Yourself From Catastrophic Auto Loan Debt
A South Florida debt lawyer can help you if you have negative equity in your car, which is starting to show its age. Contact Nowack & Olson, PLLC in Boca Raton, Florida to discuss your case.