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Car owner selling their car to get out of a car loan

How to Get Out of Your Car Loan If You Can't Afford It Anymore

04
/
30
/
2025

A car loan can be a lifesaver or a burden, depending on its terms and your ability to meet them. The biggest pitfall? Monthly payments that become unaffordable due to high interest rates, owing more than the car’s worth or changes in your financial situation.

If your car payment is too high and you’re unsure what to do, there are options available for getting out of a bad loan. Some even let you get cash back from equity in your car if it’s worth more than you owe. If you're looking for a way out, here are our proven tips for getting out of your car loan.

1. Refinance your car

Refinancing lets you replace your current car loan with one that has a lower interest rate and smaller monthly payments. However, smaller monthly payments usually extend the loan’s duration, increasing the total interest you’ll pay by the end.

Follow these steps to refinance your car:

  1. Evaluate your current loan: Refinancing makes sense if it reduces your interest rate, lowers monthly payments, shortens the loan term or helps you move to a more favorable lender. If a better loan isn’t possible, refinancing may not be worth it. 
  2. Confirm your car’s value: Knowing your car’s worth can help you negotiate better refinancing terms. Use tools like the Kelley Blue Book or NADA Guide to check your car’s market value. 
  3. Check your credit score: Lenders typically only offer refinancing to borrowers with good credit (more than 600). The higher your credit score, the better the rates you can get. Even if your credit is bad, some lenders may still refinance if you have a cosigner or accept a higher interest rate. 
  4. Compare lenders and rates: Before choosing a lender, shop around for the best refinancing interest rates and terms. 
  5. Gather required documents: Your lender may ask for your driver’s license, vehicle identification number (VIN), social security number, proof of income, residence and employment. They may also ask for details about your current loan.
  6. Apply for refinancing: Submit your application within 14 days (for VantageScore) or up to 45 days (for FICO score) of your first loan inquiry, depending upon which scoring model your lender uses. Waiting longer may hurt your credit score due to multiple credit checks. At RefiJet, we run credit checks with soft credit pulls to protect your score.
  7. Finalize your new loan: Review the refinancing contract carefully to confirm your new interest rate, loan term, monthly payment and schedule. Because once you sign, you become legally bound by these terms.

2. Sell your car or trade it in

If you want to get out of your car loan fast, you could sell or trade in your vehicle. Selling your car yourself can get you more money, but it requires more effort than simply trading it in to a dealership. And if you're trying to get out of an underwater car loan where your car is worth less than your loan amount, you’ll need to pay the difference between what your car sells for and what you owe. 

Alternatively, trade your car for a more affordable vehicle to lower your car payment without refinancing. If the dealership's trade-in offer covers what you owe, you can clear your old loan and start a new one with a cheaper car and lower payments.

3. Renegotiate or modify your loan

Lenders may provide loan modifications if you have a good payment history or proof of experiencing financial hardship. However, any modifications that extend your term may increase the total loan cost because you’ll pay more interest over time.

If you simply can’t make next month’s payment, ask your lender to pause payments temporarily. Such a deferral buys you time, so you don’t default on payments and hurt your credit score or face repossession.

Most lenders offer one- to three-month deferrals. While they provide short-term relief by temporarily getting you out of a car payment, they aren’t free. Your lender may charge you higher monthly installments or a lump sum to compensate for the missed payments. Also, deferrals often extend loan terms, increasing your total interest costs.

4. Voluntary repossession as a last resort

If all else fails to get you out of a car loan, you could potentially initiate a voluntary repossession. Voluntarily surrendering your vehicle lets the lender sell it to cover your debt. This helps you avoid further late fees and penalties that could add to the cost of your loan. However, if the lender sells your car for less than what you owe, you still have to pay the balance and any associated fees.

Even though a voluntary repossession can hurt your credit score, the damage is usually less than that of an involuntary or forced repossession. A forced repossession is when a lender seizes your car to recover missed payments, usually without warning. Most lenders charge higher fees for involuntary repossessions than for voluntary ones.

When to take steps to get out of your car loan

Struggling with your car payments is stressful, but you're not alone. If your current payments have become unaffordable or you owe more than your car's worth, it might be time to explore how to get out of a car loan. Refinancing or negotiating better terms with your lender could help reduce your financial stress and make your payments more manageable.

Selling your car or voluntarily surrendering it to your lender can also help you move forward. Just keep in mind that if the sale doesn’t fully cover your remaining balance, you'll need to pay the shortfall out of pocket.

Wondering what your next steps might be? You can easily check your refinancing options today without impacting your credit score and find solutions that best support your current financial situation.

FAQs

Here are our answers to commonly asked questions about how to get out of a car loan.

Is there a way to get out of a car loan without ruining credit?

Yes, you can refinance or sell your car. Refinancing potentially lets you replace your current loan with a more affordable and convenient one. Alternatively, you can sell your car and use the proceeds to pay off the loan. If the loan exceeds the car’s sale price, you’ll have to cover the difference out of pocket.

What if I can't afford my car loan anymore?

If you can’t afford your car loan, negotiate with your lender to modify the terms and lower monthly payments. As a last resort, consider voluntarily surrendering your car to the lender so they can sell it to cover your debt. 

Can I return my car to the lender to get out of the loan?

Yes, you can voluntarily surrender your car to the lender so they can sell it to repay the loan. However, returning your car won’t completely get you out of the loan if its sale price doesn’t cover the loan balance. You still have to pay the difference to close the loan.

Can I refinance and extend my loan term to reduce my monthly payments?

Yes, refinancing lets you replace your current loan with one that has a longer term and lower monthly payments. However, a longer-term increases the total loan cost since you'll pay more interest over time. 

Can you cancel a car loan after signing?

Most lenders don’t allow loan cancellations. However, some have a short period (one to three days) within which you can cancel. These lenders may charge cancellation fees for processing, restocking and other administrative costs.

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