Upside-Down: The Last Place You Want to Be on a Loan Filed under: ome 0 You've always dreamt of breathing in that new car smell, and finally, you've achieved your dream. Nothing should bother you now, except you have this sinking feeling right in the pit of your stomach. As the months roll by it feels like you're paying more on your car than you ought to. Sure it's functioning well, but something about the monthly payments on your car loan just doesn't feel right, and it seems to become more and more difficult to catch up to them... If you're currently going through this, then chances are you're upside-down on your loan. It's not a good place to be, and it's definitely not a place you want to stay long in. But what exactly does it mean to be upside-down on a loan? What It Means Being upside-down on a loan essentially means that you're paying more for a car than it is presently worth. This can also happen in real estate but is called 'negative equity'. This often happens because properties, particularly cars, lose value quite rapidly. Their parts degrade, engines start to fail, and new models outshine the old ones. So what happens is, you continue to pay the loan for your car in the same, unchanging amount you first agreed to, not knowing that the car is now worth much, much less. You are now upside-down on your loan. To give you a more concrete example,