If you've paid your current car loan on time, you can likely pursue another car loan, although negative equity might be an issue. Depending on your credit, the bank may allow you to carry over all or part of your old loan. You may have to put money down.
Loan-to-Value Ratio
Banks determine your loan amount based on your credit and vehicle value, known as a loan-to-value ratio. The vehicle's loan value is based on its options, mileage, year and make. Using your credit score and history, the bank determines your loan value at roughly 60 to 120 percent of the vehicle's value. If you have a positive borrowing history with your current loan, you may obtain a high enough lending percentage to carry over money, despite having limited credit.
Apply for a Loan
Apply for a loan to see if you qualify for the amount you need to borrow. Call your bank to obtain your car's payoff amount, and apply for a loan at any bank you want. Check rates at bank websites or call for details. Most banks offer an online application process, but you can benefit from calling in to discuss your credit and negative equity concerns. Have your vehicle information handy, such as its VIN (vehicle identification number), payoff amount, year, make, model and options.
Co-signer
If you can't obtain an approval because of your credit history, a co-signer can help. A co-signer uses his good credit to secure your loan. The bank uses the co-signer's credit information to determine the loan-to-value ratio, so you may obtain an approval for the total amount you want to borrow. If you cannot find a co-signer, consider putting money down. The bank you apply to should let you know how much it needs you to put down if it doesn't approve you for the requested amount.
Other Options
Consider selling your current car. You can possibly start a fresh loan without negative equity this way. Your car may sell for thousands over the bank's determined market value. If you make a profit, you can use the extra money to put it down toward a new car loan. Or, you may not have to come up with as much money to pay off your loan amount. If you have paid your loan payments on time, you are likely to obtain another loan approval, despite having limited credit.
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