How to Elegantly Enter and Exit a Car

How to Get Out of a Car Loan

Three Methods:

Whether your car payments are more than you can afford or your car new longer suits your needs, you may want to get out of a car loan early. You can pay off the loan, although you may not end up paying any less than if you'd made payments through the full term. You could also sell the car or refinance the loan. All of these options present additional difficulties if you owe more than your car is worth.


Selling Your Car

  1. Determine the fair market value of your car.Use an online service such as Kelley Blue Book to find out what cars like yours are worth in your area. You can get a general idea by simply entering the year, make, model, and mileage for your car. Generally, higher mileage corresponds to lower value.
    • Enter your zip code and add any optional features your car may have (such as power windows or moon roof) to get a more precise valuation. Optional features may boost your car's value.
    • You may also want to search online listings in your area to see what cars similar to yours are being sold for. Pay attention to how long a car has been for sale. If a car has spent several weeks on the market, it may indicate the car is overpriced.
  2. Get a payoff quote on your loan.Contact your lender to find out how much you would need to pay if you wanted to payoff your loan early. If you sell your car, you ideally want to pay off your loan at the same time. If you owe more than the market value of your car, this may not be possible.
    • Let your lender know that you're planning on selling your car. They may have specific procedures for you to follow to close out your loan.
    • If you sell your car for less than the amount you owe, you will still be responsible for the remainder of the money you owe. Some lenders may demand payment in full immediately, while others will allow you to continue to make payment. However, the terms may change since the loan will no longer be secured with your car.
  3. Clean up your car and make any repairs.If you decide to sell your car yourself, it should be in the best possible condition. Take it for a professional cleaning and detailing, and complete any necessary maintenance.
    • If you haven't taken your car to a mechanic in awhile, get it inspected and make any repairs the mechanic recommends. It's also a good idea to tell them you're planning on selling the car. They may have additional ideas or recommendations.
    • Any repairs that the mechanic recommends that you decline should be included in your private listing. Letting potential buyers know up front what work the car needs will enhance their trust in you.
  4. Trade for a less-expensive car if you can't make a private sale.If you go to a dealership, they'll typically work the balance of your loan into your new finance agreement. If you choose a car with a lower monthly payment, this might work for you.
    • Make sure you find out how much your monthly payment will be with the old loan amount before you sign the paperwork. If you can't afford the new payment, don't buy the car – it won't solve your problems and may make them worse.

Refinancing Your Car

  1. Check your credit score.You may be able to refinance a bad car loan and get a lower monthly payment and better interest rate if your credit score has improved since you initially financed your car. Generally, you need a credit score above 640 to qualify for refinancing.
    • You are entitled to one free credit report each year. You can also purchase credit reports from each of the major credit bureaus.
    • If you notice any errors on your credit report, contact the credit bureaus to get them corrected before you apply to refinance your car loan.You want the highest and most accurate score you can possibly have.
  2. Apply with lenders to refinance your loan.Set aside time to complete applications with several lenders to refinance your car. You'll need to provide basic personal information to establish your identity and income, as well as information about your car and your current loan.
    • Use free online services, such as Credit Karma or Nerd Wallet, to find lenders more likely to approve your application based on your credit history.
    • Apply to at least 2 or 3 lenders so you can compare rates. Each application you submit will result in a hard inquiry on your credit report. However, multiple inquiries for the same purpose typically won't impact your score significantly.
  3. Compare offers from different lenders.Provided you meet the minimum requirements, you'll likely have 2 or 3 offers to refinance your car. Rather than immediately going with the first offer, take the time to compare so you can find the best offer for you.
    • If you're interested in saving money overall, you generally want to go with the lowest interest rate – even if the monthly payments are higher than what you're paying now. However, make sure the additional amount will fit into your budget.
    • If your current monthly payment is too much of a strain on your budget, look for a loan that has the lowest monthly payment. This may entail extending the term of your loan relative to the original, or paying a slightly higher interest rate.
  4. Sign the contract for your new loan.Once you've chosen the offer you want, the new lender will have paperwork for you to sign so the new loan will go into effect. The lender will connect with your original lender to pay off your original loan.
    • You may need to contact your original lender to let them know in advance that you are refinancing your loan with a different lender. Find out from the refinancing lender what you'll need to do before you sign the paperwork.
    • Get a copy of the signed loan agreement for your records. Keep it with your sales contract and other car documents so you can easily access it when necessary.

Paying Off the Loan

  1. Check your loan agreement for early payoff terms.Your loan agreement specifies whether any penalty is assessed for paying off your loan early. In some cases, you may be required to pay the full amount of the principal and interest – even if you close out the loan before the end of its term.
    • Check the agreement for an item titled "early payoff" or something similar. Read that item carefully. If you don't understand it, contact your lender for an explanation.
    • Your most recent loan statement may include a balance owed on your loan. However, this amount may differ significantly from the amount of money you would need to payoff the loan in full before the end of the loan's term.
  2. Contact your lender for a payoff quote.Depending on how interest is calculated and any penalties assessed, the amount required to payoff your loan may be different from the balance reported on your most recent statement. Lenders will provide payoff quotes, which are only good for a limited period, usually between 30 and 90 days.
    • Compare the payoff quote to your car's fair market value. You can get a general idea of your car's market value for free online, using the website of a vehicle valuation service such as Kelley Blue Book.
  3. Assess your savings and budget.If you want to keep your car but need to pay off your car loan, you'll need to find the money to pay the amount your lender quoted for payoff. You don't want paying off the loan to put you in a worse situation financially, especially if you're already struggling to make your monthly payments.
    • If you won't save any money in interest by paying your loan off early, you'll generally be better off if you figure out how to make the payments for the duration of the loan.
    • If it doesn't make sense for you to pay off your loan all at once, talk to your lender about options to make additional payments to pay down your principal. For example, you could make a full payment the first week of each month, and then make a half payment the third week of each month that went entirely towards principal.
  4. Pay your lender the payoff amount.If you decide to pay off your loan early, use the payoff quote to determine how much you need to pay. Stay in communication with your lender, and make sure they know that you are paying off your loan in full.
    • Don't rely on a payoff quote more than 30 days old. To protect yourself, it's best to call and get a new quote when you're ready to pay – even if fewer than 30 days have passed since you got the last quote.
    • Even if you normally make your car payments online, it's a good idea to make this final payment using a cashier's check or money order so you have a paper trail. Include a statement such as "payment in full" on the memo line. Keep a copy for your records.
  5. Follow up with your lender to close the account.Your lender likely has a specific process for closing out a loan. Once the loan is closed, the lender is no longer a lien holder on your car's title. A new title will be issued and sent to you.
    • Check your credit report approximately 30 days from the date of your payment and make sure the loan is reflected on your credit report as closed.

Community Q&A

  • Question
    Is there a financial penalty buy out a car loan?
    wikiHow Staff Editor
    Staff Answer
    In most cases, there won't be any penalty for paying off a car loan early. Rather, you'll save money by not paying interest for the term of the loan. With some car loans, you have to pay the same total amount regardless of whether you pay it early or make payments as agreed – but this still isn't an additional penalty.
  • Question
    Can someone who became completely disabled get out of paying a car loan?
    wikiHow Staff Editor
    Staff Answer
    The car loan is designed to pay for the purchase of the car, regardless of whether the person is able to drive it. If you are unable to drive your car because you are completely disabled, you have the same options as anyone else. You can sell the car or pay off the loan early, but you can't get out of paying the loan.
  • Question
    How do I get out of a loan when the odometer has been turned back?
    wikiHow Staff Editor
    Staff Answer
    Selling a car with a rolled back odometer is fraud. Contact an attorney who specializes in car sales fraud – most will give you a free initial consultation. While you may not be able to get out of the loan, you may be able to get money from the person who sold you the car.
  • Question
    Bought a used truck yesterday and found out today I'm losing my job. What can I do now?
    Andrew Serrano
    Top Answerer
    Some states have a short period where you might be able to change your mind and return the car, but this is not likely. Talk to the person who sold you the car and see if he might have a heart and consider taking the car back. Anyone whose been in that situation will understand, but if this is a big corporate place, they may not be as understanding. Ask to speak to the finance manager; they may be able to stop the process.
  • Question
    How do I get rid of a car that a dealer sold me that has turned out to be a lemon?
    Andrew Serrano
    Top Answerer
    Look at your owners manual for a section that specifically goes over warranty. There will be a regional person that handles Lemon Law claims. Look up the requirements of your state and see if you fit within them.
  • Question
    How can a vehicle lose over half its value in only a year?
    wikiHow Contributor
    Community Answer
    New cars are released every year, driving down the value of older cars.
  • Question
    I purchased a car from a local dealer who doesn't check credit. I have 10 months of payments and when I checked the value of my car, I discovered I am paying more for the car than it's worth. What can I do about it?
    wikiHow Contributor
    Community Answer
    When financing a car, you always pay more than the car is worth because of finance fees such as interest. The only way to avoid that is through 0-percent financing; however, the purchase price of the car usually is higher.
  • Question
    I have had nothing but problems with car but only 18 months into a 5 year agreement. How can I get rid of the car and the loan?
    Andrew Serrano
    Top Answerer
    Look into the Lemon Law in your state...quickly. The loan you were given was never depending on the continuing reliability of the car, so getting rid of the loan isn't going to happen. If you are able to prove the car is a lemon, the manufacturer will have to give you your purchase price back, minus mileage, which should pay off most of your loan (but not always).
  • Question
    Can I make three or four payments in one month?
    wikiHow Contributor
    Community Answer
    In most cases yes, but it depends on who gave you the loan and what their contractual terms and conditions state. The only way to find out if this is possible is by asking the relevant company, it's not possible to give a "one-size-fits-all" answer here.
  • Question
    What do I do if I lost my job, but have a car loan?
    Andrew Serrano
    Top Answerer
    There is really nothing you can do. Talk to the finance company, many times they will allow a one time postponement of a car payment or an extension where they take payment that is do now and add it to the end of the loan to give you time to get unemployment going or find a new job.
Unanswered Questions
  • I bought a car and couldn't make payments. I gave it back to the bank and they said I owe them nothing. Now they say I owe them 10k. What should I do and how should I get out of this debt?
  • How can I get out of a car loan by refinancing if I have negative equity?
  • I want to stop paying for the car and sell it. How can I do this?
  • I bought two cars a year and a half ago but I can no longer afford the loan payments. What should I do?
  • If I sell my vehicle, could I take the money from the sale and buy another car without paying off remaining balance on loan yet?
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Quick Summary

To get out of a car loan, you have a few options, including selling your car and using the money you get to pay off the loan, refinancing your car loan so you have a lower monthly payment and better interest rate, and paying off the loan with your savings and keeping your car. If you decide to sell your car to pay off the loan, look up its fair market value first to make sure it's worth more than you owe. To refinance your loan, you'll most likely need a credit score that's above 640.

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  • This article primarily deals with getting out of a car loan in the United States. Car loans elsewhere may be subject to different regulations. Speak with your lender or with a financial advisor to learn more about your options.
  • Paying off your car loan early may have a more negative impact on your credit score than if you made payments as agreed for the full term of the loan.


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Date: 02.12.2018, 05:34 / Views: 74172