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Pay off the loan or the underwater amount?
Just the underwater amount. For example, if you owe $6500 on a car and the dealer is willing to give you $5000, just paying the $1500 will clear the loan and you'll be starting fresh on a new term with a new vehicle with no added amounts slowing you down. That new vehicle will be depreciating while you're still playing catch up. Granted it would be spread out over the new loan term but... I think you get what I'm saying.