Why Your Loan Balance Matters

Outstanding Balances Explained

Updated on November 3, 2021

Reviewed by Andy Smith

Woman in a car with door open — Photo:
Arnold Media / DigitalVision / Getty Images

A loan balance is simply the amount you have left to pay on your loan. It can often be different from the payoff amount, which is the amount you’d need to pay today to completely pay off your loan.

Your loan balance changes on a daily basis, because interest is added daily. Any loan you take out will carry a balance until it's fully paid.

What the Loan Balance Means When Buying a Car

Your existing car loan balance will impact the price of the vehicle you can afford, because you have to pay off that car loan. It's an additional expense on top of the insurance, gas, and new monthly car payment, and it will be a factor in determining your eligibility for a new car loan. Use this information to guide your car shopping.

Note

If you own a vehicle that you purchased with financing, but are looking to trade it in for a new one, it’s important to know what your loan balance is before you ever walk onto the dealership lot. You want your trade-in price to cover the loan balance, at a minimum.

Outstanding Loan Balance

An outstanding loan balance is usually not a good thing and typically refers to a past-due amount. If you are late on your loan payments, you will receive a notice that could refer to this past-due amount. It can include some stiff penalty fees, depending on your lender's loan terms.

Sometimes, "outstanding balance" simply means the remaining balance in its entirety. This is a neutral use of the term and is nothing to worry about.

Best Loan Calculators

If you cannot find your loan statement, you will need to know a few details about your loan to calculate your loan balance. Use a traditional loan calculator, and input the remaining time left on your loan, your monthly payment, and your interest rate. Of course, you can also call your lender or check your account online to get an accurate statement of your loan balance.

You can get straight to the number you are looking for with a loan balance calculator.

Trading in a Car with a Loan Balance

Typically, it is not a problem to trade in a car, even if you have a remaining loan balance. If the value being offered on your vehicle is higher than the amount you owe, you will come out ahead. You can then pay off your loan and use the remaining balance toward your new car purchase.

Some different options are available for you if you owe more than the dealership is willing to pay for your trade-in. You have the opportunity to pay off the remaining balance on your own, or you might be able to roll your remaining balance into your newly financed car loan.

Warning

Rolling over your loan balance will almost certainly put you upside down on your new car loan, meaning that the loan is larger than what your vehicle is worth.

Being underwater on a loan is never a good idea, and having an upside down car loan will often be more headache than it's worth, requiring additional insurance and stress. If you do have to roll your loan balance over, you will need to work hard to pay it down quickly.

Of course, it is best to avoid all of this by purchasing a vehicle you can afford to pay off before you trade it in for a newer one. Adding hundreds or thousands of dollars to the price of your new ride isn’t any fun.

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