How to Get Out of a Bad Car Loan 1
Car loans are no joke. Especially if you have been stuck in a car loan that you have been making monthly payments for with no such benefit provided to you. In situations like such, it is easy to get frustrated and want out.
But first we have to find out what exactly is a bad car loan and does yours qualify as a bad car loan?
The easiest answer to that is any car loan that you have difficulty being able to afford or you are paying more than you should be. In circumstances like these, you cannot help but wonder if there is any way you could be paying less each month and still keep your car.
Well it is not completely unheard of. Many people want to know the answer to that question. But in order to determine whether you can pay less each month than what you are paying right now, you have to take a quick look at your loan which is made up of three main parts:
From these three parts, the term and interest is adjusted to reduce your monthly payment. But to do that, you have to create a new car loan which is a process called auto refinancing and can help you find out how to get out of a car loan you cannot afford.
In order to find out whether or not refinancing will work for you, the first thing you need to do is find your sale contract or payment stub. This will help you find the interest rate you are being charged and the term of your car loan contract to find the number of months remaining on the loan.
You can choose to call your bank or lender, simply give them your loan number and they will tell you this information. They can also tell you the remaining balance of your current loan.
Once you know what the current interest rate you are paying at, you can check your credit score to find out what rate you could now qualify for. And in order to get the current interest rate you qualify for, you need to contact several lenders for a quote. If you want a lower interest rate, you will be able to lower your monthly car payment to stop paying so much.
To find out how much you can save just by refinancing, you can use an auto loan refinance tool that requires you to input a desired loan term. This desired loan term has to be the same as your remaining loan term.
Please note that this is the number of months you have left on your loan and not the length of the loan from the beginning when you borrowed it. This refinance tool will calculate the interest rate you could get and provide a rough estimate on how much your payments could decrease just by that interest rate.
In case you want to reduce your payments further, you can see what happens when you extend the number of months in your new loan. However, it would be in your best interest not to spread the loan over a large amount of time as that will lead to you paying more interest in total. Moreover, if for some reason, you take too long to pay off this loan, you can run the risk of being “upside-down” on your loan which means you can be owed more for the car than it actually is worth.
You can choose not to refinance if you are already close to the end of your loan. The potential savings you might have from a lower interest rate might not be worth going through the process again.
Moreover, if your credit has failed to improve, it is not likely that you will qualify for a lower interest rate. However, you can still change up the length of the loan but that is usually kept as a last resort option. If you feel like there is nothing else you can do, you might as well change the length of the loan. This is the best option for people wondering, “can you get out of a car loan early?”
You should also try to make sure that there are no prepayment penalty fees in your current loan contract. However, it might not be a problem for you as most car loans do not have such charges in which case you will be good to go.
There can be other ways for you to deal with a bad car loan although these options may not help you or yield as much result as refinancing might. But if you cannot afford to refinance your car loan due to any reason, you might want to consider:
Your debt will not be erased automatically if you decide to surrender your car nor will it get you out of the promissory note that was signed by you when the loan was taken out.
Even if the lender chooses to sell the vehicle to someone else, you will still end up owning a big balance for it. And if that happens, you will either just have to settle the debt or risk being sued by the lender.
So yes, you can choose to get out of a bad car loan. However, just remember, prevention is better than cure which is why you should always try to make sure that the contract you are signing is something that you are okay with.
Now, it is common to think about how to get rid of a car loan illegally. However, that is not necessary as you can get out of an upside-down car loan just as easily using the methods stated above.
Moreover, to answer the question, “how to get out of a car loan contract?”, the best way to get out of one would be to contact your attorney and discuss the loan agreements with him. Since every contract is different and has different terms, only a professional who knows the terms of your contract will be able to help you.
So now that you have all the options available and know how to get out of a bad car loan, you would be able to make a decision about what you can do considering your credit score and the length of your loan.
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