Sometimes a car loan just becomes too much, maybe your financial situation has changed since you first got the loan, or you know that it’s about to change and need to free up some income. Regardless of the reasons there are a few ways you can get out of the loan if you need to, and this article will walk you through them.
Pay It All Off
This might sound like the simplest solution, if you don’t want the monthly payments anymore, just pay it all off at once! Unfortunately it’s anything but simple.
For one thing, you actually need to have enough money to pay off the rest of the loan, which is no easy feat, but more importantly most Loans have clauses that penalize early repayments. Generally these are extra fees that would’ve been agreed upon when you signed the loan agreement.
That doesn’t mean you can’t or shouldn’t do it, you just have to be prepared to also pay these extra fees. You can contact your lender and request a payoff quote, they won’t be very happy with you for it but they’ll let you do it.
Trade In The Car
If finances are a problem, it’s possible that you may no longer be able to afford the car you initially purchased and if that’s the case then trading the car in for a cheaper alternative might be a good option.
When you trade the car in, the dealership will give you an offer based on the car’s current value, they’ll then use that money to pay off the remainder of the loan and what’s leftover you can put towards a new, cheaper car.
This is a fine solution, as long as the car is worth more than what you owe, which depending on when you got the car might not be true. Cars depreciate in value, especially right after they’re first purchased. So it’s quite possible that your car loan is currently worth more than the car itself and if that’s the case trading in probably isn’t the best idea, because you’ll still have to pay extra on top of the value of the car to pay off the loan.
Refinance the Loan
If the monthly payments are just too high, a potential alternative to getting out of the loan is refinancing. If your credit has improved since you took the loan you probably qualify for a reduced interest rate, which would lower your monthly payments, or you could extend the loan terms to get a lower monthly payment.
Negotiating with your lender is always possible, and if they don’t like it you can take your loan somewhere else that’s more lenient to your needs.
There’s no easy way to get out of a loan. Unfortunately, whatever you choose, the money needs to be paid. It’s just a matter of what method will work best for your situation.