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Helping Members Get Off the ‘Negative Equity Treadmill’

Learn three underutilized approaches to help members who are upside-down on their loans.

By Tim Kelly | Updated on August 03, 2018
Being upside-down on a loan is a common situation for CU members.

It’s an all too common situation. A couple named Lisa and Roger own a vehicle that increasingly presents expensive mechanical issues, feels dated in terms of technology, and is too small and unreliable for a growing family. They’re eager to get into a newer car but the value of the current car is $10,000 and they owe $15,000. They are “upside down” on the loan and in a bind to purchase a new vehicle.

They are far from being alone in this situation. According to Edmunds.com, 32.5% of U.S. borrowers who trade in vehicles are in a negative equity situation by an average of $5,100 as of the last quarter of 2017. Moreover, these borrowers often end up in a negative equity cycle that is extremely difficult to break.

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