How To Get Out of a Car Loan You Can’t Afford

It’s important to figure out how much your car is currently worth because it can affect how you should go about getting out of your loan. Do a quick Google search and find a car value calculator that takes your vehicle’s make, model, year, and number of kilometers into account. Check out online classifieds and see what used cars with similar features are selling for.

Tips For How To Get Rid Of A Car Loan

There’s also more legwork involved when selling your car on your own. You have to take visually-appealing photos of the vehicle and write the listing. Then you’ll have to post it to marketplaces, make flyers, or take out local ads. Generally, selling a car privately is more lucrative than trading it to a dealer. And with online marketplaces, it’s easy to market your car to a wide range of buyers.

Calculate your negative equity

Ideally, you will have money left over after doing this to buy a cheaper used car that you don’t need to take a car loan out for. If this is the case, you can sell your car and pay off your car loan early. Second, make sure you use the money to pay off your auto loan. Usually I would get the money deposited into my checking account, which I then used to make an extra payment on my loan. When you refinance, you get a lower interest rate than you are current paying. Instead of paying $500 when your monthly payment is due, you pay $250 every two weeks.

If you don’t want to refinance yet and are just behind on a few payments, it could help to talk to your lender. For example, you can ask for a temporary forbearance which will pause your payments for a short period. Some lenders may also change your monthly amount to a more manageable level, giving you more time to find your bearings. If you don’t want your financed car anymore, you can either sell it, trade it in, or voluntarily give it back to the lender. Keep in mind, you’ll still need to pay off the balance of the loan. Perhaps the easiest way to make a dent in your car loan payments is by paying more than the minimum each month.

  • You’ll be able to pay off your debt in full and your credit rating will stay the same.
  • Lower your monthly car payments and save on interest through a fast and easy online application process.
  • A bad car loan is one that causes you to spend more money than usual while paying off the loan.

If you owe more than the car is worth, you have negative equity that will need to be resolved. You can pay your car loan off early to end the loan either with your own funds or by selling the vehicle. But you can’t simply end a car loan without fulfilling the terms of the agreement. Be aware that some lenders will charge prepayment penalties because they make less in interest if you pay early. Ideally, you owe less than your car is worth and you can pay the loan off with the sale.

Why is my monthly car payment so high?

You use the new loan proceeds to pay off the remaining balance of your old loan. If you’re already struggling with your payments, this payment can make your situation much worse. If you have the cash available, simply paying off your car loan early could be the fastest way to get out of it. Additionally, this will save you money on interest and might also help improve your credit score by reducing your outstanding debts.

This is the single most important factor in getting any type of loan, including an auto loan for a car. Your credit score is what the lender will use to estimate your capability of repayment of the loan–the most important factor to them. It’s very important to realize that the credit score you see is not a definite number, but a morphing, changing range of numbers.

Create a budget and consider any emergency situations that could cause problems with making payments in order to protect yourself from defaulting on an auto loan. Voluntary car repossession may sound scary, but it can actually be a great way to get out of an unaffordable loan. It may be difficult at first, but if you’re already facing late payments and other financial hardships, it could mean the difference between getting by or struggling even more.

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