How to get out of a car loan | Roost
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How to get out of a car loan

Are you stuck in a car loan that you can’t afford? Do you feel like there’s no way out of your financial situation and that the monthly payments are just too much of a burden? Don’t despair, as there are ways to get out of a car loan. In this article, we’ll explore all the available ways to get out of your loan – from making early payments to selling your car, you have options. 

Need cheaper car insurance?

Can you get out of a car loan?

Yes! You can get out of a car loan.

First step, review the terms of your car loan to understand what legal and financial obligations you are under.

Next, keep reading to find the best path for you to get out of a car loan.

How to get our of a car loan

Pay off your car loan early

Making an extra car payment each month will help you pay off your loan much faster. Not only will you get out of the loan sooner, you’ll save yourself money on the interest.

Roost Tip! Some car loans may have early pay-off penalties so be sure to review the terms of your loan to avoid any unpleasant surprises. 

Sell your vehicle

If you think you can sell your car for at least the pay-off amount this is probably the fastest, and best way to get out of your car loan without any negative ramifications. 

Roost Tip! But remember! If you can’t get enough to pay off your loan, you’ll still owe the balance (aka continued car payments) but no car.

Trade in your car

Your dealership may let you trade in your vehicle by purchasing a different one. They will generally work with you to pay off your balance by rolling it into a new loan.

Negotiate with your lender 

Negotiating with your lender may help you reduce your monthly car payments or lower your interest rate on your existing loan. 

It’s not exactly getting you out of the loan, but if car payments are breaking the bank then this can alleviate financial pressure.  See more on how to negotiate with your lender below.

Refinance your car loan

Refinancing is another great option. Whether you got an unfavorable rate or just a big car payment, refinancing can get you out of a car loan and into a better one.

Consolidation

Consider taking out a personal loan to pay off your car loan, along with any high interest credit card debt. Depending on your credit score, you might find better rates, lower payments, and bonus, you’ll get the title to your car!

Voluntary Repossession

If none of the above options work for you you might decide that returning the car is your only way out of your car loan. 

There will still be repercussions to your credit history, but it will show up as a voluntary repossession. Which could work in your favor if and when you apply for a new car loan in the future.

Also keep in mind that if you owe more than the car is worth, you may still be on the hook for the difference between what the dealership could sell the car vs. the balance on your loan.

Make early payments on your loan

Making early payments on your car loan is a great way to save money in the long run and reduce the amount of time it takes to pay off a loan. 

Payments ahead of the due date help reduce the total amount of interest you pay, so it’s worth considering if you’re looking for ways to get out of a car loan. 

Essentially, making an early payment means you’ve paid off principal early on the loan which in turn means you’ve paid a lot less money on the loan than was originally projected.

When making an early payment, make sure that it is at least equal or greater than the minimum payment required each month. This will help ensure that your loan balance continues to decrease over time without incurring additional fees or interest from late payments. 

Roost Tip! Avoid title loans! These types of car loans are targeted at people who are financially distressed and ends up costing a lot more money in the long run. This Pew Trust report lays out all the wrongs of title loans.

Avoid fees when making early payments

It may be possible to negotiate with your lender to reduce or waive certain fees associated with making an early payment or refinancing a loan before its term ends. 

Some lenders may agree to waive prepayment penalties or allow for a lower interest rate if you make extra payments on time consistently over a certain period of time. 

Negotiating with the lender can help if you can’t make full monthly payments due to financial hardship – they may be willing to work out a repayment plan that works better for both parties involved.

Set up Automatic payments

If possible, try setting up automatic payments for your car loan so that it is taken out of your bank account every month without having to manually transfer funds yourself each month. 

This keeps late fees at bay and reduces the stress of hands-on bill paying and management.

In fact, many banks offer incentives such as cash back rewards or lower interest rates, when signing up for automatic bill payment services. It can save you time, late fee money, and even protect your credit score from being hurt by a late or missed payment.

Need cheaper car insurance?

Negotiating with the lender to reduce your payments

Negotiating with the lender to make car loan payments more manageable can be a great way to address financial difficulties. 

Taking the time to research and prepare before talking to your lender is an important strategy to make things go you way. 

Things to research:

  • Competitor rates and deals
  • Your current credit score
  • Your financial history
  • Your current loan terms
  • Possible government incentives that might offer financial relief

Compile a list of negotiation points with your lender

  • A flexible payment plan
  • Waiving late fees other penalties
  • Reducing the monthly minimum payment
  • Reducing interest rates

Using alternative financial solutions for your loan

If you’re looking for a way to get out of your car loan, there are several alternative financial solutions available. 

  • Refinancing the loan can be an excellent method for reducing monthly payments and securing lower interest rates or more manageable terms. 
  • Consolidating multiple payments into one can also help make managing finances simpler while potentially saving money in the long run.
  • Credit unions and other lenders may have better deals than traditional banks, so it’s worth researching them as well. 
  • Peer-to-peer lending networks offer more flexible repayment plans and may be suitable for those with low credit scores who don’t qualify for a standard loan. 
  • Government initiatives like the CARES Act could provide assistance in certain cases to those struggling with their car payments too.

Understanding car loan terms

A car loan is a form of financing used to purchase a vehicle, paid back over a period of three or more years. It’s essential to understand the terms of your loan before taking on any additional debt as it can effect your monthly payments and overall cost.

  • Annual Percentage Rate (APR) – The car loan interest rate and varies depending on your credit score; generally, higher scores will be offered lower rates. Research lenders to find the most competitive APR rates.
  • Secured vs unsecured car loans – Secured loans require collateral such as property or another vehicle.  Unsecured loans don’t need any security but tend to come with higher APRs. 
  • Short-term loans offer lower interest rates but must be paid off in two years or less.
  • Balloon payment loans – allows you to pay part of what’s owed each month until reaching a large lump sum at the end of the term.

Other ways to cut car expenses if you can’t get out of a car loan

Find cheaper car insurance with a car insurance calculator

Most of us are probably paying too much for car insurance. Looking for insurance though can sometimes feel overwhelming, so we tend to put it off.

But, using a car insurance calculator like this one from Insurify makes insurance shopping a breeze.

Just put in all your info then it finds and compares insurance rates available to you in your area.

Ways to save on gas

For some of us, our road warriors are not just a means to an end but a part of the family, and we will neither sell them nor abandon them for a bike ride, so, for our hardcore car loving fans out there – here are a few ways to save on gas money.

Find car insurance discounts

Maybe you love your car insurance carrier and don’t want to shake things up by switching? Heck, sometimes just being a long-term customer can be a discount in itself. So here are some other discount ideas you can ask your carrier about, like bundling your renters insurance.

Need cheaper car insurance?

A quick note! Our goal is to gather and share info that’s up-to-date and helps you make great decisions as a renter. That said, the information you get directly from a provider could be a little different. Make sure to review their terms and conditions directly; and, if you see anything here that needs to be updated, please let us know! Advertising disclosure
Last Updated: August 21st, 2023