Do I Need Gap Protection For My Car Loan
Do you realize how much you are at risk financially if you wreck your car or it gets stolen? Your auto insurance policy might not provide all the financial protection you need, if the value of your car is less than the balance of your auto loan. Gap coverage is designed to cover the difference between the value of your car when it was lost and the balance of your car loan. This is also called Negative Equity. Having to continue to pay off your car loan every month, when you don’t even have your car anymore is probably not what you had in mind when you bought it. Let’s say you lost your car in a hurricane or other disaster, one year after you purchased your car: Now let’s say you still owe $20,000 on your auto loan and your deductible is $500. Let’s also say your car was worth $15,000 at the time you lost it. The insurance company pays you $14,500. Then your Negative Equity or Gap is $5,500. Gap Protection isn’t really insurance, it’s a Debt Cancellation Agreement. You could call it a w...