Your car is totaled, but you still owe on the loan
A consumer finance counselor walks through the numbers
A total loss payment usually reflects what the car is worth under the claim rules. It doesn’t automatically match what’s left on your loan. When the loan is bigger than the settlement, some balance may be left over. The lender also holds a claim on the car. That affects how the payment gets issued. Before you assume the account is closed, get the numbers in writing. [1, 2]
Gather three numbers
From the insurer, get the settlement it is offering and any deductible. Get a dated payoff amount from the lender that includes interest and fees. Next, see if you purchased guaranteed asset protection, commonly known as gap coverage. It may have come with the loan or lease, or from the dealer or insurer. [1, 2]
Gap products come with limits and exclusions. Find out from the provider exactly how to file and what amount it might pay. [1, 2]
Stay current on the loan
You can still owe on the loan while the claim is open. Check with the lender about whether a scheduled payment is still due. Ask how they’ll apply any insurance money. If you can’t make a payment, call the lender before it’s due to ask what options are available. Don’t count on a spoken promise that insurance will take care of everything. [1, 2]
Make sure the account closes correctly
After the payments go through, request a new loan balance or a letter saying the loan is paid in full. Find out if add on products you never used may be refunded under your contract. Keep the settlement, the gap decision and the lender statement together. If the numbers don’t add up, ask each company to explain how it did the math. [1, 2]
Questions for the lender and insurer
- What is the loan payoff amount, and as of what date?
- Who gets the insurance check?
- Do I have gap coverage, and what are its exclusions?
Ask for both statements on one day
Request both papers on one day: the insurer’s settlement in writing and the lender’s payoff statement. [1]
Sources and further reading
- 1Consumer Financial Protection Bureau, gap coverage
- 2California Department of Insurance, total loss and loan balance
This is general information from a consumer finance viewpoint. Loan, lease, insurance and gap contracts all differ. Get written figures from the lender and the insurer before you make a money decision.
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