The answer, my friend, is GAP insurance. Guaranteed Asset Protection, or GAP, is a type of insurance that, should something happen, covers the difference between how much is owed on a loan and how much a car is worth.
When is GAP Insurance Needed?
When something unforeseen happens to your car, whether it be stolen or deemed a total loss after an accident, having GAP insurance can save you hundreds or thousands out of pocket. This is because even full coverage insurance – which all financed vehicles are required to have – won’t always cover your loan balance, only the actual cash value (ACV) of the vehicle.
If a vehicle has negative equity (the car is worth less than you owe), which is becoming more common as loan terms grow, GAP insurance can help you avoid a hit to the budget. Here are some examples of when GAP insurance may come in handy:
- You have negative equity from a previous loan rolled into your current loan.
- You opted for a long-term loan to save on monthly payments.
- You made a down payment which was less than the initial depreciation of the vehicle.
- Your vehicle has excessive wear and tear or mileage, which lead to a lower ACV.
Where Can I Get GAP?
Most often, GAP insurance is purchased through your auto insurance company, a dealership, or a third party. It’s a good idea to rate shop before buying, because costs vary by provider.
If GAP is purchased when you buy your vehicle, the dealer will typically roll it into your loan. However, you’ll face higher overall costs going this route, because you’ll be paying interest charges on it. It may also be more difficult to remove coverage if it’s included in your financing.
Don’t Let Yourself Fall in the Gap
Making sure you’re fully covered for any situation can sometimes be difficult, but covering the difference between what you owe a lender and what your insurance will cover in an accident shouldn’t be. Something else that shouldn’t be difficult is getting the auto loan you need – even if you’re struggling with credit issues.
Auto Credit Express can help ease that situation. We work with a wide range of dealers that have the lending resources available to help people who struggle with bad credit, no credit, bankruptcy, or even repossession. Let us help you find a dealer in your area. Simply fill out our obligation-free auto loan request form and get started today!