Wondering how to get out of a car loan? Check out this useful guide.

An auto loan is a useful tool for getting behind the wheel of a new or pre-owned car when you don't have the cash to pay for the purchase in full. But if your financial situation changes, the monthly car payment might not be feasible anymore. Knowing how to get out of a car loan is an important aspect of entering into a financing agreement.

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Whether you're considering a loan or already have one and need to make a change, this guide on how to get out of a car loan can help. We've compiled a few options for trying to alter the terms of the deal or get out of the loan altogether.

Sell the Car

One quick way to get out of a car loan is to sell the vehicle through a private sale. If you're not upside down on the loan, meaning the car is more valuable than what you currently owe on it, you can use the proceeds of the sale to pay off the current loan in full. Another term for an upside-down car loan is negative equity.

Before listing your vehicle, reach out to your lender to request the payoff amount. This amount usually differs from the remaining balance you can see on your statement or online account. By requesting the payoff amount, you can determine how much you need to sell the car for to pay off the loan.

If you financed your existing loan through a bank or credit union, you might need to take the funds to a physical location to complete the payoff. Online lenders might accept checks or other payment methods by mail, or you might have to go into a partner location to pay off the loan balance.

After the payoff, you won't owe car payments anymore. If you still need a vehicle to get around, consider obtaining new auto financing to purchase a less expensive vehicle with a monthly car payment that fits into your budget.

If you do owe more than what you can sell the car for, you won't be able to pay off the loan in full with the proceeds from the sale. In this case, you could cover the difference with a personal loan or cash. You might also want to consider another option to get out of the loan.

Renegotiate the Terms

When you're facing a difficult financial situation that affects your ability to make your monthly car payment, reach out to the lender to discuss options.

Many borrowers go through periods of hardship, whether due to job loss, economic downturn, or other situations. Lenders offer options to individuals experiencing difficult times, and you won't be the first or the last to request assistance.

Some lenders can offer a temporary pause on payments, allowing you to get back on your feet without losing your car. Another option is to renegotiate the terms of the loan. You could pay a lower payment for several months while you seek employment or adjust your financial situation in other ways.

A lender is more likely to work with you if you can explain the reason for your financial hardship. For example, if you lost your job but work in an industry with many opportunities, you could share this and demonstrate your commitment by showing proof of applications you've submitted to open positions. If you experienced a health problem that impacted your ability to work or caused a financial burden, emphasizing that this is a one-off situation could help you qualify for a loan relief option.

By requesting a loan renegotiation, you might be able to get a lower car payment or even skip a few payments. Make sure to discuss any implications these actions might have on your credit. When a lender offers relief, they typically agree to not report the missed payments to credit reporting agencies as long as you adhere to the terms of the renegotiated loan.

Refinance the Loan

If interest rates have dropped since you finalized your auto loan, refinancing is a good option that can help lower your monthly car payment. When you refinance a loan, you enter into a new loan agreement with either the same lender or a different one.

The new loan provides funds to pay off the previous loan, and you make your monthly payment on the new loan. When you can secure a lower interest rate, your monthly payment can go down because you'll pay less each month in interest.

Some lenders place restrictions on auto loan refinancing, including outstanding balance limits, mileage caps, and the age of the car. If you're experiencing financial hardship, talk to your lender to figure out whether refinancing is a viable option for you. Borrowers who are behind on payments or dealing with other issues that negatively affect their credit might have a harder time qualifying for refinancing.

Pay off the Loan

Another option to get out of a car loan is to pay it off yourself. If you have enough cash to cover the full payoff amount, you might want to consider this option to eliminate monthly payments.

Even if you can't swing the full amount, paying extra each month goes directly toward the principal balance, which pays off the loan faster. Those who can afford to pay over their monthly car payment will get out of their loans faster than those who only pay the required amount.

Consider a Voluntary Repossession

Voluntary repossession should be the last resort if you're in a dire financial situation and can't get out of your loan any other way. When you give possession of the vehicle to the lender voluntarily, you might not experience as much of a hit to your credit. But it's important to understand how this process works.

When you agree to a voluntary repossession, you start by informing the lender that you can't make the monthly payments anymore. The lender will provide a time and place to meet for surrender. Keep a record of when and where you dropped the vehicle off and who took possession of it.

After the creditor takes possession, they will try to sell the car. When the sale happens, you'll get a statement that outlines the details, including the purchase price and what you still owe the lender. The difference is known as the deficiency balance, and you're responsible for paying the full amount.