When you’re looking for a car loan, it’s important to consider what kind of coverage you want. GAP coverage is one option that can provide peace of mind in the event your car is totaled or stolen. But what is GAP coverage and should you get it for your used cars in miami loan? Here’s a breakdown of what GAP coverage is and how it can benefit you.
What is GAP coverage?
GAP coverage is an insurance policy that covers the difference between the amount you owe on your car loan and the actual cash value of your vehicle. If your car is totaled or stolen, GAP coverage can help pay off the remainder of your loan so you’re not left owing money.
You have less than 20% equity in your vehicle
If you have less than 20% equity in your vehicle, you may be required to get GAP coverage by your lender. Lenders typically require GAP coverage for loans with a high loan-to-value ratio, which means you’re borrowing a large amount relative to the value of your vehicle.
The value of your vehicle has dropped quickly.
If you bought a vehicle that depreciates quickly, you may want to consider GAP coverage. For example, luxury cars and sports cars tend to lose value quickly, so if you have a loan on one of these types of vehicles, GAP coverage can help protect you from being upside down on your loan.
You owe more on your vehicle than it’s worth.
If you’re upside down on your loan – meaning you owe more on your loan than the actual value of your vehicle – GAP coverage can help pay off the remainder of your loan if your car is totaled or stolen.
You financed the full purchase price of your vehicle.
If you financed the entire purchase price of your vehicle, you may want to consider GAP coverage. This is because there’s a higher chance you’ll be upside down on your loan if you didn’t put any money down when you purchased your car.
Deciding whether or not to get GAP coverage for your used cars in miami loan is a personal decision. There are pros and cons to getting GAP coverage, and it’s ultimately up to you to decide if the peace of mind it can provide is worth the cost. Be sure to talk to your lender about their requirements for GAP coverage and shop around for the best rates before making a decision.
