What to Do with Your Loan if Your Car is Totaled

Has your vehicle been declared a total loss after an accident, and you still owe money on your auto loan? Here's a clear guide to help you understand what happens next and what steps you should take.

Understanding the Total Loss Process

When your car is totaled, your insurance company will determine its actual cash value (ACV) i.e. the market value of your car at the time of the accident. They will then issue a payout based on this value, minus your deductible. The payout will be issued to the lien holder listed on your insurance policy.

If your loan balance is less than or equal to the ACV, the insurance payout will cover the loan, and you won’t owe anything further. However, if your loan balance is greater than the ACV, you’ll be responsible for paying the remaining amount out-of-pocket.

Steps to Take Immediately

1. Contact Your Insurance Company: File a claim and get the ACV estimate.

2. Talk to Your Lender: Confirm your loan balance and understand how the insurance payout will be applied.

3. Check for GAP Coverage: Review your auto insurance policy or loan documents to see if you have GAP insurance.

4. Continue Loan Payments: Keep making payments until the claim is settled to avoid credit issues.

The Role of GAP Insurance

GAP (Guaranteed Asset Protection) insurance is designed to cover the difference between your car’s ACV and the remaining loan balance. For example:

• Loan balance: $25,000
• ACV: $20,000
• Deductible: $500
• Insurance payout: $19,500
• GAP insurance covers: $5,500

If you have GAP insurance, it will pay the lender the shortfall, and you won’t owe anything more on the totaled vehicle. If you don’t have GAP insurance, you’ll need to pay the remaining loan balance yourself.

Final Thoughts

A totaled car with an active loan can be financially challenging, but understanding your insurance coverage and loan terms can help you navigate the situation more effectively. If you’re unsure about your coverage or need help calculating your potential shortfall, reach out to your insurance provider or lender for assistance.

Has your auto loan with BluCurrent been declared a total loss? We’ll gladly assist you with the total loss process. Contact us at (417) 887-1983 and ask for Loan Support or email us at loansupport@blucurrent.org