Negative Equity A National Disease

Capitalism has many benefits in a free society. It has inherent benefits to those who are creative and willing to work hard. Nowhere else can such a variety of people from many diverse backgrounds and countries succeed by their own efforts.

However, sometimes our creative efforts cause serious problems. As a people, we have become enamored of things, possessions, and goods. We want to own the biggest house, the biggest automobile and other possessions without number. And for all the things we say we want, there are manufacturers ready and willing to provide them. In order to be competitive these same manufacturers are always seeking better ways to convince us that it is possible to own that Cadillac El Mundo Gordo Magnifico SUV when realistically we can only afford the Ford Sub-Midsized ordinary Sedan. Desire for things, plus superb salesmanship overcomes common sense and basic math. The result can be what the subject of this article is all about.

L's clear up a couple definitions.

Equity: The market , Foreclosures 101 value of a property , Cheap Loan Secured (house or car or whatever) minus any mortgage , Finding A Memphis or money , 10 Tips To Help You Save On Car Insurance owing on the property. , Bad Credit Mortgage Loan How To Get Started

Example # 1 Positive Equity: You have owned a house for thirteen years. Its market , Life Insurance Medical History Increases The Cost For 66 Of Applicants value is $400,000. You owe the bank , Cheap Loan Secured $225,000 over the next seventeen years. Your equity in the house is $175,000. This is positive equity.

Example # 2 Negative Equity: You buy , Life Insurance Medical History Increases The Cost For 66 Of Applicants a house for $300,000. The housing market , Social Security Benefits How To Report Your Check Missing changes and the market , The Credit Repair Process value drops to $200,000. You owe the bank , 10 Tips To Help You Save On Car Insurance $225,000. Your equity in the house is $25,000. This is negative equity and sometimes referred to as being "upside down". This is a very bad thing.

Negative Equity occurs frequently with automobile purchases. , Finding A Memphis Mortgage What do you do if y've had the car two years and want to trade , Unsecured Debt Consolidation Loans Debt Reduction Without Using Collateral it in? The "upside down" buyer , Council Right To Buy Mortgage Helping Everyone Have A Home Of frequently adds the amount on the trade-in onto the loan , Insurance Or Assurance Do You Need Reassurance for the new car. They also stretch out the loan , Why Credit Cards to keep the payments , An Investment Strategy For The Coming Post Petroleum Age low. This is a losing proposition as the longer the loan, , Bad Credit Mortgage How To Get Started the longer it takes to reach a point where they owe less than the vehic's depreciating value. , Reasons Why County Court Judgments Affect Mortgage Acquisition It is a financial , Why Credit Cards Catch-22.

How does this happen?

It is a combination of things. In order to sell more cars, manufacturers offer deep discounts on new cars. This has the effect of depressing the value , Unsecured Debt Consolidation Loans Debt Reduction Without Using Collateral of cars, which coupled with five and six-year loans , Instant Approval Credit Cards Instantly Gratifying means 's going to take much longer for car owners to achieve a position of positive equity. (two to three years is not unusual)

It is a fact that the moment you drive your car away from the lot it is a used car. If you are paying , Online Insurance Shopping Finding Health Insurance On The Web $45,000, the Kelly Blue Book value , Secured Personal Loans Are The Easiest Means To Obtain Cheap Credit may be $40,000. If you still owe $43,000, the's a $3000 difference. How do you protect yourself if you have an accident? Now the vehicle owner has more problems.

Gap Insurance

Why is an auto gap insurance , Graduating From University policy so important? Because standard comprehensive and collision auto policies only cover your new car's "fair market , Bad Credit Used Car Loan When Bad Is Not Really Bad At All value". And that can be as little as 80% of what you paid for your car, starting the minute you drive it off the lot. This condition of negative equity may exist for the first two or three years of ownership.

This means that if you're involved in an auto accident , Health And Medical Insurance Comparing Managed Care Health Plans that leaves your new car "totaled", you could end up paying , Getting A Better Consolidation Loan Secured off a loan , Long Term Care The Who The What And The How on a car that you can't drive. This is where gap insurance , Online Shopping Finding Health Insurance On The Web comes in. A gap car insurance , Cheap Loan Secured policy insures you for the difference between what you owe on your car and what your insurance , Bad Credit Used Car Loan When Bad Is Not Really Bad At All company says it's worth. In some cases this insurance , A Beginners Guide To Online Loans will be required as part of purchase , 10 Tips To Help You Save On Car Insurance or lease.

Gap insurance , 6 Myths About Bad Credit coverage would also become critical if your car is stolen. Thieves prefer new cars and they seek out specific models, which usually happen to be the most popular models of cars sold. (Honda Accord, Ford Taurus - etc. etc.)

If your car is stolen, the insurance , Debt Consolidation Loans For Unemployed Preparing For An End To Debts situation is the same as in the case of an at-fault accident , Unsecured Debt Consolidation Loans Debt Reduction Without Using Collateral on your part: comprehensive insurance , Locating Cheap Auto Premiums will cover the value , 10 Tips To Help You Save On Car Insurance of the vehicle, but not necessarily the value , Reasons Why County Court Judgments Affect Mortgage Acquisition of the loan , 6 Myths About Bad Credit that you owe to the bank. , Instant Approval Credit Cards Instantly Gratifying You could be stuck paying , Cheap Loan Secured thousands for a car that's long gone. Add that to the truly disheartening feeling of having your car stolen, and that makes for a really rough time.

As a Lemon Law firm, we see many situations of negative equity when a case is being settled with an auto manufacturer. Often it is the first time the owner discovers the reality of being upside down on their loan , Instant Approval Credit Cards Instantly Gratifying or lease. It is always painful. We certainly could offer scads of advice about this situation. The first piece of advice would be, never buy , Seven Deadly Trading Mistakes Part Three something that is beyond your means. This advice will surely be ignored over and over. The other thought, which i't really advice is, if you get caught in a situation where your negative equity is going to be expensive, , Credit Card Processing How To Legally Beat The System By Passing Processing Fees To Customers bite your lip and promise yourself you will never get in that sort of situation again. 's bad for you and accepting these kinds of deals only encourages manufacturers and their financial , Instant Approval Credit Cards Instantly Gratifying organizations to offer these "good deals".

Donald Ladew, Staff Writer for Norman Taylor & Associates, is a professional writer and author of numerous articles on quality,customer service issues and many other subjects. This article approved by Norman F. Taylor Esq. For more information about this most important subject, please read Lemon Law - The Standard Reference Guide, Norman F. Taylor Esq. ISBN 0-9760058-0-8 http://www.lemonattorneys.com or http://www.normantaylor.com For further inquiries, Mr. Ladew may be reached at: donald@normantaylor.com Phone: 818-244-3905.