What Is Negative Equity?
Negative equity means owing more on a loan than the asset securing it is worth. It is also called being upside down or underwater. It often occurs with car loans because vehicles lose value quickly, and with mortgages when home prices fall. Negative equity = loan balance − current market value (when the result is positive).
Example
A car worth 18,000 with a 22,000 loan balance has 4,000 of negative equity.
Why It Matters
Selling or trading in the asset does not cover the loan, so the difference must be paid or, in a trade-in, may be added to a new loan.
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Car Affordability Calculator
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Auto Loan Calculator
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Home Equity Calculator
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🔗 Related Terms
More Loans & Credit Terms
- Amortization
- APR (Annual Percentage Rate)
- Balance Transfer
- Balloon Payment
- Buy Now, Pay Later (BNPL)
- Cash Advance
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Last updated: September 27, 2026. This definition is for general educational purposes only. It is not financial, investment, tax, legal, or medical advice, and it does not recommend any product or course of action. For decisions about your own situation, consult a qualified professional.