How to get out of a car loan?(Last Updated On: October 12, 2016)
All the individuals who are in the need of getting out of their car loans should find the market value of their car as the first step. By doing this, it can be determined whether he/she has a negative equity. Hence the current value of the car should be determined. For this, valuation services like NADA Used Car Guides and Kelley Blue Book can be used. These particular sites are capable of estimating the value of the car depending on its condition, model and also the make of it.
Another option for the people who have chosen high risk loans on their vehicles will be selling the vehicle. Based on the loan payment you have made on the vehicle and how the value has fluctuated of your car, sometimes the value of your car will be higher than the value you owe on the loan. In this type of situation the vehicle can be sold and the remaining profit can be used to settle the loan. As a result you will be a debt free person and your credit also will be untarnished. It is important to contact your lender before selling the vehicle.
Refinance is also a wise decision to make in order to get rid of the car loan. If the current loan rates are difficult for you to pay, this will become a good option. Refinancing process involves in setting up a new loan agreement between you and the lender. This is also known as debt restructuring.
Transfer of the loan is also one of the decisions you can make. Based on the regulations of the bank, you will be able to do the transferal of your loan to a trusted party. This becomes a better choice if you need to sell your car which is not fully paid to your closest friend and by doing that, he will assume your payments. When choosing this option you must be very careful and must not trust the new owner that he will make the payment every month and behalf of the lender. So, policies can be made in order to keep the trust between you and the new owner.
If you have no option to choose and you have nothing left to do, simply you can walk away. If you can’t sell your car, can’t get the approval for a refinance and in a high financial stress, you can talk to your lender directly and tell him that you can’t afford the loan payments anymore. By giving your vehicle willingly, you will not be accountable for costs associated with the vehicle being repossessed by a repo agency.
The last choice you have in order to get out of the car loan is paying off your loan. You can simply pay off the amount which will be the cheapest and simplest option. If you have enough cash with you, you can contact the lender and pay it off directly.
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