If you’re finding it difficult to keep up with your payment schedule, you may be seeking ways to get rid of your car loan. Take a look at a few ways you can safely do that:
Sell your car
If the current worth of your car is more than your debt, you can sell your car and use the money to pay off your debt. The advantage to this is that you can completely pay off your loan without tampering with your credit score. Depending on your vehicle’s current market value, you could still have a substantial amount of money left after settling your loan.
While selling your vehicle may not be the most pleasurable option, it is a great way to get rid of your car loan, especially when you cannot keep up with your payment schedule. You can find out your vehicle’s worth using a car value calculator online.
Transfer your car loan
If someone is willing to buy your car, you can work up a contract with your lender in their name. Signing the contract means they have taken on your debt and the payment of the car loan becomes their responsibility.
Not all banks and credit unions accept loan transfers so find out if your Lender accepts such. The new owner may need to meet certain criteria such as having a good credit score and insurance coverage before the car loan transfer can be approved.
Negotiate with your Lender
If you feel you may default in your payment, firstly talk to your lender. Most lenders understand that unforeseen financial crises could happen to anyone. If you speak to your lender, you may be able to find alternative ways to get rid of your car loan.
Lenders often have policies to help their customers who are experiencing financial difficulties. You can get your lender to let you pause your payments for some time. Some lenders may even offer you options to modify your payment amount or loan term.
Refinance your car loan
When you refinance, you pay off your current loan with a new loan. If you have a better credit score or if you’re earning more than you did when you first got the car, you may be able to find a lower rate and better terms than what you are currently paying.
If you do not want to sell the car, but can’t keep up with payments, you could try refinancing your loan for a longer term. This way your can spread your loan over a longer period and pay smaller amounts monthly. Note that although you’ll be paying less monthly, a longer-term means you’ll end up paying more over time.
Lenders can choose to repossess your vehicle when you default in payment. If there are chances that your vehicle will be repossessed, consider voluntarily surrendering your vehicle. This is because repossession will greatly damage your credit rating. A voluntary surrender will also hurt your credit but the impact is lesser than when it is a repossession.
Before you go ahead to surrender your vehicle consider negotiating with your lender, selling your car, or refinancing your loan. Surrendering your vehicle voluntarily should be a last resort because of its adverse effect on your credit.
You can get rid of your car loans using any of the above options. However, before making your choice, you must consider the impact each of them could have on your credit rating. The most favorable option will be the one with the least effect on your credit.