If you’re in the middle of a car loan that you’re unhappy with, you may be able to get out of it. Here are some of the top ways to get out of an auto loan.
Getting Out of a Car Loan
When you want out of a car loan, it isn’t as easy as telling the lender you want out. Since you signed a loan contract with them, there are some steps you need to take if you no longer want to be tied to the loan.
Most auto loans are somewhere around four to eight years long, or 48 to 96 months. Until you make every scheduled payment to pay off the balance completely, you’re responsible for the loan. The lender places a lien on the title, proving that you have a loan on the car, which stops you from legally selling the vehicle to someone else until that loan is completed.
However, there are ways to get out of your current auto loan without finishing the years of payments. Here are some options to explore:
- Sell the vehicle – You can sell the car to someone else if they give you a large enough offer to pay off your loan. If you get an offer and it covers your loan balance, you send the money to the lender so they can release the lien from the title. After the lien is removed, the buyer can register the vehicle in their name. If you have any money leftover after the sale, you can pocket that cash.
- Trade it in for another one – If you’re not happy with your vehicle and/or the loan, then you may be to trade it in for another one at a dealership. As long as the dealer offers you enough to cover the loan balance, you should be able to trade in your car. If you get an offer that more than covers your loan balance, anything leftover can be put toward a down payment on your next vehicle.
- Return it to the dealership – This option may not be available to you depending on when you purchased the car and what kind of dealership you bought it from. Some dealers offer return policies, stating that you can return the vehicle within a certain time frame (usually within a week or so if it’s an option). If you recently purchased the car, then contact the dealership to discuss your options. Dealerships with in-house financing (where the dealer is also your lender) may be more willing to work something out since they don’t rely on third-party lenders.
- Refinance – If you’re trying to get out your current auto loan but still want to keep the car, then refinancing could be for you. Refinancing is replacing your current auto loan with another one, and most borrowers look for another lender to refinance with. The biggest motivation for refinancing is getting a lower monthly payment or a lower interest rate. Many borrowers with poor credit are assigned higher interest rates, and once they improve their credit score with the loan, look for a refinancing lender so they can get a lower interest rate with their improved credit. This could be a good option for you if you like your vehicle but aren’t happy with your loan terms.
- Voluntary surrender – If you’re struggling with paying for the loan, and selling it or refinancing aren't options, then you may have to return it to the dealership voluntarily. This is called a voluntary repossession, and it's the same as a repo, but you return it on your own terms and avoid paying recovery company fees. Once it’s been surrendered, the lender usually preps it for auction. The proceeds from the auction sale are put toward your loan balance. If the sale doesn’t cover the whole balance, called the deficiency balance, you’re still responsible for it. While surrendering your vehicle doesn't completely get you off the hook for the car loan, it's more convenient than waiting for the repo man to take the vehicle if you can't keep up with the payments. Talk to your lender about your options before you go through with this option.
Looking to Start Another Auto Loan?
In some cases, getting out of a car loan is easier than getting approved for one. Many borrowers with poor credit find it difficult to get approved by traditional auto lenders. However, here at Auto Credit Express, we have a nationwide network of dealers that are signed up with subprime lenders.
Subprime lenders specialize in assisting borrowers with unique credit situations, such as bankruptcy, situational bad credit, or a past repossession. These lenders are third-party lenders, and they’re signed up with special finance dealerships. Our network includes special finance dealers, and we want to look for one in your local area at no cost. Get started on the path to your next auto loan by filling out our auto loan request form.