How to Get Rid of Car Loan
When you feel your car payments have become a burden for you or your family, it is time to learn how to get rid of the car loan. It’s common to see someone made a wrong decision when dealing with their car loan. This often happens when a person is facing bankruptcy. Whatever the reasons are, there are many ways to get rid of a car loan. Follow the step by step guide below to get out of a car loan if you have these questions in mind:
- How to get rid of a car you owe money on?
- How to sell your car privately when you have a loan?
- How to get rid of a car payment?
- How to get rid of car loan debt?
Step 1: Check your car’s market value
Understanding your car’s market value is the first thing you have to do. DO NOT estimate your car by just checking a used car websites online. Use a reliable online valuation service such as NADA Used Car Guides or Kelley Blue Book (kbb.com). Kelley Blue Book is widely recognized by both consumers and the automotive industry so the report is trustworthy. In addition, drive your car to at least 2 or 3 local used car dealerships to see what are the prices they offer. There are many factors to determine your car price, for example, body condition, extra accessories, mileage and overall condition.
Step 2: Check if you have an upside-down loan
Now you already know the market value of your car, compare it with your current loan amount and see if you have negative equity or not. An upside-down car means you owe the loan more than the car’s value. Having an upside-down loan is very common if you just own the car for 1 to 3 years. If you don’t have a negative equity, congratulations! You can just sell your car right away to get rid of the remaining car loan.
Step 3: Solutions for upside-down car
There are a few options you can do if you have an upside-down car. It depends on what you plan to do next. For example, if you no longer need the car and want to get rid of car loan completely, you can borrow the difference. Let’s say you owe $15,000 on the car, and the current market value is only $12,000, borrow $3,000 to pay it off. On the other hand, if you still need the car and want to lower your monthly car payment, you need to refinance. In our Car Buying Guide, we mentioned that refinancing is one of the easiest and simplest way to pay off your car loan faster. Do some research to find out which local banks or credit companies are offering low interest rates for refinancing. Lastly, if you are selling your old car for a brand new car, the only thing you can do is pay the difference. You will need extra cash for the new car down payment too. There is no way to buy a new car without extra cash if you are having an upside-down car loan.
Step 4: Sell your car privately when you have a loan
If you are selling your car privately to a friends or someone else, he or she would have to get approved for a new loan in the amount of the agreed purchased price. The new owner’s bank will then pay you the money. You can then use the money to pay off your own car loan. Extra money is needed if your loan is upside-down. Otherwise, you could have some extra money left if the selling price is higher than your loan amount.
Step 5: Use cash to pay off the car loan
The best method to completely get rid of car loan is to pay it off with cash. It is always the easiest and cheapest option as there is no extra cost for loan processing fees. With adequate amount of cash on hand, you can contact your lender to discuss the available options to pay it off. Without a car loan, you can live a debt-free life. Last but not least, see also Buy a new car with cash: Smart or Stupid?
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