Totaled car - loan more than value

What is the name of your state? Arizona

I just totaled my car. It was my fault. The value of the car is thousands of dollars less than the loan (it's only 1 1/2 yrs old). Does anyone know how this works with insurance? Does the insurance company pay the value and we pay the balance to the lender (sans car) or by including the lender as loss payee do they agree to pay the lender the amount owed? If we do have to pay the lender the balance, they can't call it all due, can they? I'm more than a bit worried.

Shaken Candy

[I AM ALWAYS LIABLE]

[quote]Originally posted by UCMe2Day
[b]What is the name of your state? Arizona

I just totaled my car. It was my fault. The value of the car is thousands of dollars less than the loan (it's only 1 1/2 yrs old). Does anyone know how this works with insurance?

MY RESPONSE: Yes, I do.



Does the insurance company pay the value and we pay the balance to the lender (sans car) or by including the lender as loss payee do they agree to pay the lender the amount owed?

MY RESPONSE: The insurance company pays directly to the loss payee (that's why they are called a "payee") the fair market value of your vehicle on the date it was destroyed. Unless you purchased "gap" insurance, the fair market value is all that will be paid to the lender. You remain "on the hook" for the contract balance of the loan.

Yes, the lender can "call the loan" immediately because the "collateral" (the car) no longer exists. So, unless the lender wants to make a new loan arrangement with you, you will be liable for the entire amount immediately - - pursuant to the terms of the loan papers you signed.

IAAL

Thank you. I was afraid that was how it worked. They (Insurance and Lenders) are not in this for the altruistic aspects.

Guess I'll be prepared for the answers tomorrow. Thanks again.

Candy