How I Need Gap Protection For My Car Loan

Are you aware of how financially at-risk you are if your car is wasted or stolen? If your car is worth less than your auto loan balance, your car insurance policy may not provide all the financial protection you need. Vacancy coverage is designed to cover the difference between the value of your vehicle at the time of loss and the balance of your vehicle loan. This is also called Negative Equality. Having to keep paying off your car loan every month when you don't even own a car anymore probably wasn't what you had in mind when you bought it. Let's say you lost your car in a hurricane or other disaster a year after you bought it: Now let's say you still owe $20,000 on your auto loan and your exemption is $500. Let's say your car was worth $15,000 when you lost it. The insurance company pays you $14,500. Then your Negative Equity or Void is $5,500. Gap Protection is not insurance, it is a Debt Cancellation Agreement. You might call this a waiver of the part of your auto loan agreement that requires you to pay the difference between the value of your car and the amount you still owe on your auto loan. There are a few states that consider Gap Protection a form of insurance, but most do not. Is Gap Protection for you? Talk to the person considering your car loan. Car buyers who invest little or no money in a car may need Gap Protection. You may need extra protection if you're transferring the balance of previous auto loans to an existing auto loan or if you're using an extended auto loan, such as a 60-month loan. Any car buyer who will owe more from their car needs Gap Protection. You need to calculate the expected depreciation of the car you bought and the equity accumulation ratio on your auto loan. This will help you understand how big of a gap you will have and how long it will take. Some lenders or leasing companies include coverage in the contract for their protection. This is common in lease agreements. The gap scope purchase decision is easy. Deciding who to buy from is much more difficult. You can get Gap Coverage for your car loan from your Credit Union or another lender, online gap protection dealers, or your auto insurance company. Every option is different, so read on before deciding on an option. On the Internet, these options are easy to explore. You can go to your favorite search engines like google or yahoo and use the keywords "gap protection" or "auto loan gap coverage". Be sure to check before giving your credit card information to any company you find on the internet. If anything, you don't want to end up with a provider that won't be there to help you close the gap on your car loan. Your Car Insurance Carrier: Not all insurance companies offer gap protection for your car loan. Contact your representative. Check to see if they include gap protection on your car loan and how much collateral they provide you. You may need more than they offer. The cost of gap protection depends on the value of your car. The more expensive the car, the more it costs, and the more coverage you need. It is also very important to keep in mind. Your insurance company or another provider will continue to bill you for gap protection each month. It's up to you to calculate and decide when you no longer need it. In other words, you need to know when to get out of the hole. You need to know when there is no longer a difference between the value of your car and the amount you owe for your car loan. The Auto Dealer or whoever gave you your car loan is another source for buying gap protection. This is done as soon as you get your car loan, so if you choose this option, bring it up right away. Some lenders may allow you to buy later, but it's best to buy when you get your loan. As soon as you pull the car out of the parking lot, it becomes a used car. The cost is normally a one-time fee, usually the same flat price for all customers purchasing the same coverage. Buyers can transfer the fee to the total loan amount and include it in their monthly loan payments. Dealers often don't have the best rate for gap protection. You may want to choose another option. The average price of gap protection through auto dealers is about $500. You can get the same protection for your car loan through your credit union or bank for as little as $250. Make sure your gap protection includes the deductible. Look for other features like car exchange or money for a new car in case anything happens. So don't let price alone be your guide when choosing who to buy gap protection from.