Life can change quickly, and there are plenty of reasons you may want to get out of your auto loan. Perhaps you want to downsize or upgrade your current vehicle . Or you may simply be overwhelmed with the payments because of financial difficulties. For example, if you have to pay for other emergency expenses or have lost your job, you may no longer be able to keep up with payments. Luckily, there are a few ways of getting out of your loan.
Look into Refinancing
If you can’t sell the car or want an easy solution, consider refinancing the loan. This is sometimes the best option for everyone involved since the lender will not need to pay to repossess the car, and you might get a better rate while keeping your credit intact. Refinancing means you’ll get a new loan to pay off the current one, and you might be able to get lower interest rates or lower monthly payments. Or you could get new terms on the debt. It’s important to understand your options to refinance before making a decision so you can find the best lenders. You may decide to use an auto refinance calculator during your research. For instance, if your credit has improved since taking out the loan, you may now be able to get a lower interest rate.
Sell the Car
If the car is still worth more than what you owe , sell the vehicle, and use the funds to pay down the rest of your debt. You can pay it off completely, keeping your credit score intact. Let the lender know if you want to sell the car, since they may have instructions for closing the loan out.
Transfer the Loan
If you are selling the vehicle, consider transferring the loan. If you find someone willing to take the debt on, you could create a new contract between them and the lender. The owner will need to meet the lender’s requirements, like having the right insurance and a good credit score. Credit unions and banks often have stricter requirements and they might not be as willing to accept transfers. But if you can use this option, ensure the documentation is signed by the new owner. That will protect you from unnecessary risk if the new owner ends up defaulting.
Give the Vehicle to the Lender
This should be your last resort since it can damage your credit score significantly. If selling the vehicle won’t cover the amount or you can’t transfer your debt, you can give the car to the lender voluntarily if you think you might default. Your lender can then car it at an auction. If they do not have enough money to make payments, you will still need to cover the amount. However, when you voluntarily give the car to the lender, you will avoid a collection agency seizing it. But in the future, it might be harder to get a loan, especially if you want to get one with good interest rates.