What is "when an item is worth less than what you owe on it?

When an item is worth less than what you owe on it, it is commonly referred to as being "underwater" or "upside down" on the loan. This means that the value of the item (such as a car or a house) has depreciated to the point where it is worth less than the remaining balance on the loan used to purchase it.

Being underwater on a loan can be financially risky because if you were to sell the item, you would not be able to recoup the full amount of the loan, leaving you with a deficit to pay off. It can also make it difficult to refinance the loan or trade in the item for a new one.

To avoid being in this situation, it is important to carefully research the value of the item you are purchasing and make sure you are not overextending yourself financially. Additionally, making larger down payments or choosing a shorter loan term can help prevent you from owing more than the item is worth.