How to Get Out of a Car Loan

How to Get Out of a Car Loan

Posted on January 28, 2021

If your circumstances have changed and you’re about to face an unaffordable car loan payment, you have options. Just make sure that whatever option you choose, you take action before you miss a payment!

Just what options are open to you if you are trying to get our of a car loan?

You have a few options open to you. Exactly which is best depends on your personal circumstances.

5 Ways to Get Out of a Car Loan

Pay off the car loan with savings: If you’re fortunate enough to have savings, you could use them to pay off the car loan. As long as using your savings doesn’t leave you financially exposed it could be your best option.

Refinance the auto loan: Auto loan refinancing means keeping the same loan but negotiating a longer term for lower payments. You can also lower the loan amount depending on how much you have paid off.

Get as cheaper loan: If you still have a good credit score and haven’t missed a payment, you could potentially get a cheaper car loan. This could lower your monthly payments and overall cost of borrowing.

Transfer the loan: If you have a family member willing to take on the debt, transferring your car loan over to them is possible with many lenders. This will mean signing the loan over and them taking on responsibility for the remaining payments though.

Sell the car: If you have another car or have enough equity in the car to afford another, cheaper car, you could sell up and settle the auto loan. This would only work if you have paid enough off or have a premium car, but it is an option.

Auto Loan Repayment Penalties

While you may not have any choice, watch out for early repayment penalties. Most auto loans don’t have these anymore but some still carry them. An early repayment penalty is a levy applied by the lender to repay the lost interest from the loan.

They can be as little as a couple of month’s interest or as much as the total interest of the remaining loan. Check your contract to see whether your auto loan has any early repayment penalties.

Discuss it With Your Lender

If you think you’re going to get into financial difficulties, discuss the situation with your lender as soon as possible. Talking to them ahead of time means they will be much more flexible in how they deal with you and you could find they have another option available to you.

We always recommend discussing any potential difficulties before they happen as in our experience, lenders appreciate honesty and are much more willing to deal meaningfully with someone who want to do the right thing before the worst happens.

Thanks for reading! Hopefully this helps you prepare fore getting out of your current car loan for any reason. If you have any more questions. Please contact us here!