How to Get Out From Under a Car Loan

You’re not alone if you’re struggling to make your car loan payments each month. Here are some tips on how to get out from under a car loan.

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Assess your situation

If you’re struggling to make your car loan payments, you’re not alone. According to a report from the Federal Reserve, about one in seven Americans are behind on their car payments. But being behind on your car payments doesn’t mean you’re stuck. There are a few things you can do to get out from under your car loan and improve your financial situation.

How much is left on the loan?

If you owe $20,000 on your car loan, for example, and your car is only worth $15,000, you have negative equity in the vehicle. That puts you “upside down” on the loan, meaning you’ll have to come up with cash to make up the difference if you want to sell or trade-in the vehicle. You may also be required to pay that difference – plus any fees related to cancelling the loan early — if your car is totaled in an accident and the insurance company doesn’t pay off the entire balance of the loan.

What is the interest rate?

Interest is the price you pay for the use of money that you borrow. Your interest rate is a percentage of the loan amount that you pay the lender as compensation for borrowing the money. The higher your interest rate, the more you will pay for your car loan overall. Most lenders offer both fixed-rate and variable-rate loans, so be sure to compare both options before deciding on a loan.

To get an idea of what kind of interest rate you may qualify for, check out our Car Loan Interest Rate Estimator. Keep in mind that the interest rate is not the only factor that determines the cost of your car loan. Other important factors include:

-The length of your loan: The longer your loan, the lower your monthly payments will be, but the more you will pay in interest overall.
-Your credit score: The higher your credit score, the lower your interest rate will be.
-The type of lender you choose: Some lenders, such as credit unions, offer lower rates than others.

Are you current on payments?

If you are current on your payments, you have a few options. You can try to refinance the loan, which may lower your interest rate and monthly payments. You can also try to trade in the car for a less expensive model. If neither of these options is possible, you may want to consider selling the car and using the proceeds to pay off the loan.

Decide if refinancing is the best option

If you find yourself struggling to make your car payments each month, you may be wondering how to get out from under your car loan. One option is to refinance your loan. This means taking out a new loan with a lower interest rate and using the money to pay off your existing loan.

Will you save money?

The first step in deciding if refinancing is the best option is to find out whether or not you will actually save money. You can use a refinance calculator to estimate your new monthly payment and compare it to your current monthly payment. Be sure to also factor in any closing costs associated with refinancing. If your new monthly payment is lower than your current monthly payment, refinancing may be a good option for you.

Are you extending the loan?

If you plan to keep the car for several more years, it may not be worth refinancing. By extending the loan, you could end up paying more in interest over the long term. You may also miss out on lower interest rates if rates fall during the life of your loan.

What are the fees?

Before you refinance your car loan, make sure to factor in all of the costs associated with the new loan. These can include:

– Application fee: This is a one-time fee that is charged by the lender when you first apply for the loan.

– Origination fee: This is a one-time fee that is charged by the lender at the time of closing. It is typically a percentage of the total loan amount.

– Prepayment penalty: Some lenders charge a fee if you pay off your loan early. This typically applies to loans with a fixed interest rate.

– Taxes and registration fees: These are fees that are typically required by your state or local government and are not directly associated with the loan itself.

Choose the right refinancing option

If you’re struggling to make your car loan payments, you may be looking for ways to get out from under the loan. One option is to refinance the loan. This means taking out a new loan with a lower interest rate to pay off the original loan. There are a few things to keep in mind when considering this option.

Rate-and-term refinance

A rate-and-term refinance loan replaces your current auto loan with a new loan at a lower interest rate. The term of the loan may be extended or shortened. Depending on the equity in your car, you may also be able to add or remove a co-signer.

Cash-out refinance

A cash-out refinance is a refinancing option in which the new mortgage loan is for a larger amount than the existing loan in order to convert home equity into cash. The extra amount over and above the existing mortgage loan is paid out to you as cash. For example, if you have a $100,000 mortgage on your home and you wanted to refinance it for $150,000 in order to get some cash out, you would have a $50,000 equity stake in your home.

Refinance with a cosigner

If you brought your car loan debt into marriage with you, or if your spouse has better credit than you do, consider refinancing the loan in both of your names. You may not get the best interest rate, but it will be lower than what you’re paying now and may help you score a lower monthly payment. If you go this route, make sure both of your names are on the title to the car as well.

Get preapproved and compare rates

It’s no secret that car loans are one of the worst types of debt you can have. They often come with high interest rates, and if you have a long loan term, you could end up paying thousands of dollars in interest.

If you’re struggling to make your car loan payments, or you’re simply tired of paying interest on your loan, there are a few things you can do to get out from under your loan.

First, if you have good credit, you may be able to get a lower interest rate by getting preapproved for a new loan from another lender. This doesn’t mean you have to get a new car; you can simply use the preapproval to refinance your existing loan at a lower interest rate.

You can also try to negotiate with your lender for a lower interest rate. If you have good credit and a solid payment history, your lender may be willing to lower your rate.

Finally, if you’re struggling to make your payments, you may want to consider selling your car and using the proceeds to pay off your loan. This won’t be easy, but it will get rid of your debt and free up some extra cash each month.

Refinance your car loan

The interest rate on your car loan makes a big difference in how much you’ll pay over the life of the loan. If you can refinance your car loan to get a lower interest rate, you could save money on your monthly payments and pay off your loan faster.

Before you start shopping for a new car loan, check your credit score to see where you stand. You can get a free credit report from each of the three major credit bureaus – Experian, Equifax and TransUnion – once every 12 months through AnnualCreditReport.com. A higher credit score will give you a better chance of qualifying for a lower interest rate when you refinance.

Getting approved for a new car loan also may be easier if you have some equity in your car. That’s because lenders typically require borrowers to put down at least 20% of a vehicle’s purchase price as a down payment when they finance a new car. But if you’re refinancing an existing car loan, you may be able to qualify for a refinance even if you don’t have 20% equity in your vehicle.