Purchasing a new car can be exciting, and the chances are, unless you are paying the entire total of your vehicle in cash, you are signing a car loan before you can bring your new car home. Car loans range in their terms, and they may have interest rates that are more or less in your favor, depending on where you are buying the car from and the deal you can work out with the car dealership.
Despite entering into a car loan and being excited to drive your new car, you may find yourself wondering at some point in the future how to get out of your car loan. Our article gives tips on getting out of a car loan when you need some financial relief.
Why Attempt to Get Out of Your Car Loan?
You may attempt to get out of your car loan for many reasons. In most cases, having to get out of your car loan occurs during a significant change in your financial situation, such as losing your job or having a different financial responsibility, like a new baby at home. These situations may mean that you can no longer pay your monthly car loan bill, and it’s important for you to get out of your car loan for your finances to thrive.
Alternatively, you may want to get out of your car loan because the terms aren’t in your favor, or you want to figure out if you can get a better interest rate. Doing this can help you save money over time and may even help you pay your car loan off faster.
Ways to Get Out of a Car Loan
Below, we give you some of the most common ways to get out of a car loan. It’s important to keep in mind the reason why you want to get out of your car loan, as this will help you navigate our tips below; certain methods may only work for certain situations.
For example, you won’t want to pay off your loan or make extra payments completely; selling your car is a better idea in this case.
1. Sell Your Car
Selling your car is one of the best ways to get out of a car loan. You can sell your car at its fair value using any online car marketplace or a person-to-person sales website like Facebook Marketplace, and then you can use the money to pay off the rest of your car loan. Make sure you inform your lender that you are planning to pay off the loan completely and check specific loan terms before completing the sale of your car.
2. Pay Off the Loan
Paying off the loan is another way to get out of a car loan, but this method is only applicable when you have enough extra money to pay off the loan, and you want to keep your car. Simply work with your lender to pay the rest of your loan payments at once and allow the loan to be closed completely. You may also want to make extra payments to speed up how fast your car is completely paid off; doing this may save you money when it comes to monthly interest.
3. Trade Your Car In
You can always trade in your car if you still need a car but can’t quite afford your current car loan payments. You can trade in your new vehicle for one that is older or in a more used condition, use the money to pay off the rest of your car loan and take out a car loan with a much smaller payment. This method can be complex, so make sure to review all loan terms before completing a car trade-in.
4. Refinance Your Car Loan
Refinancing a car loan can be done when your financial situation or credit score has significantly changed from the point when you took out the car loan to the current time. Refinancing a car loan can help you lower your monthly payments and save on interest, depending on your specific financial situation. Over time, a refinanced car loan may be able to be paid off faster, helping you get out of your car loan as soon as possible.
5. File For Bankruptcy
If your car loan payments are simply one part of a larger financial problem, you may need to file for bankruptcy to get out of your car loan. Doing this may require legal assistance, and you should always leave bankruptcy as your final solution in any financial or debt-related problem, as bankruptcy may stay on your credit report for up to ten years and be visible in any public records searches performed on you when you request loans in the future; you can use Information.com to see what shows up on any searches like this.
6. Dealing with a Troublesome Car Loan
Purchasing a new car is often an exciting moment, but the car loan payments and financial responsibility that go along with a new car can be stressful. If you need to get out of your car loan, there are many methods to help you along. Simply review our tips above and keep in mind the reasons you need to get out of your car loan so you can choose the best method for your specific car loan situation.