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You have money questions. Bankrate has answers. Our experts have been helping you master your money for over four decades. We continually strive to provide consumers with the expert advice and tools needed to succeed throughout life’s financial journey. Bankrate follows a strict , so you can trust that our content is honest and accurate. Our award-winning editors and reporters create honest and accurate content to help you make the right financial decisions. The content created by our editorial staff is objective, factual, and not influenced by our advertisers. We’re transparent about how we are able to bring quality content, competitive rates, and useful tools to you by explaining how we make money. Bankrate.com is an independent, advertising-supported publisher and comparison service. We are compensated in exchange for placement of sponsored products and, services, or by you clicking on certain links posted on our site. Therefore, this compensation may impact how, where and in what order products appear within listing categories. Other factors, such as our own proprietary website rules and whether a product is offered in your area or at your self-selected credit score range can also impact how and where products appear on this site. While we strive to provide a wide range offers, Bankrate does not include information about every financial or credit product or service. An auto loan or lease is a great way to get behind the wheel of a vehicle without having to break the bank. But if you find yourself in a circumstance where you can no longer afford your monthly payments, or are possibly on the verge of becoming on your loan, there are ways out. Consider how renegotiating, refinancing or selling your vehicle may be beneficial — and if voluntary repossession is a better option than default. 5 options to get out of a loan you can t afford
There are a few ways you can exit if the loan no longer fits your budget. But you’ll need to tread carefully if you want to minimize the hits to your wallet and your credit rating. 1 Renegotiate the loan
You can reach out to your lender and negotiate a new payment plan. This is an especially good option if you have good credit and payment histories and only need temporary assistance to catch up due to unforeseen circumstances. It is possible to give yourself some extra time by deferring payments or even your loan term — but keep in mind the longer the term, the more interest there will be overall. Before arranging to meet with your lender, take a close look at your finances and estimate what kind of monthly payment you will be able to stick to for the remaining duration of your loan. Lightbulb Key takeaway 2
Another strategy is to sell the car. Because you don’t own the car outright, you need to get permission from your lender first. Contact the lender, let a representative know you are interested in and ask about the transfer process and paperwork, including the credit application a potential new owner would need to fill out. Trading in your car at a dealership is similar to selling, but it may be a simpler process than going through a private sale. However, you may not receive as much for your vehicle from a dealer. You may also be able to sell to a friend or family member if that’s something you are interested in — and the lender approves. But you are still on the hook for any remaining balance on the auto loan. Lightbulb Key takeaway 3
You should consider to your lender as your absolute last resort. To make this process more bearable, ask your lender if turning over your car voluntarily will clear you of your loan obligation. By turning in the car, you save your lender the cost and hassle of repossession, so you may be able to strike a more favorable final pay-off amount. It may free you of some final costs, including late or or fees tied to the resale of the vehicle. But this route will mean a hit to your credit score and could make auto financing more difficult in future. Lightbulb Key takeaway 4
Refinancing your loan will help you save money month to month, in the long term or both. A lower interest rate can decrease your monthly payment and overall interest paid. However, this can be difficult to do if you’re already behind on payments or don’t have great credit. A longer repayment term can decrease your monthly payments, but also increase overall interest paid. Refinancing is a good option if your credit score has improved since you initially signed off on your loan agreement. A better credit score means you can likely qualify for lower interest rates and more favorable terms. But be on the lookout for any fees that come along with refinancing your loan. A common one being an early repayment penalty which is exactly what it sounds like — a fee for paying off the loan early. Lightbulb Key takeaway 5
If you are struggling to meet your monthly payments, then the option of paying off your loan entirely may be a stretch. But if you have the financial backing to pay it off, you can walk away and get rid of the financial stress of even more potential debt. One way to pay off your loan is to pay one large lump sum. Before going ahead with this route, be sure to confirm with your lender the amount owed. It will most likely be a combination of your loan balance along with your interest fees. Another — less daunting option — can be to raise your monthly payment slightly, so that the payoff happens earlier. It means less interest overall but may not be possible if you already fall short of making your car payments. Lightbulb Key takeaway Exiting a lease
Because you don’t own the car, you have far fewer options to early. First, contact your leasing company and ask to rework your terms. Be upfront about your financial situation and try to have an amount in mind that you will be able to pay through the end of the lease. In most cases, you will be required to make the remaining payments even though you are returning the car. Some leasing companies charge an early lease termination fee and disposition fee — on top of any other standard end-of-lease fees, like potential excess mileage charges. You can also to someone else, but this won’t be cheap or risk-free. Online sites, such as Swapalease, LeaseTrader and LeaseQuit, help current lessees connect with drivers willing to take over their leases. Fees vary widely, so shop carefully. The bottom line
Learn more SHARE: Rhys has been editing and writing for Bankrate since late 2021. They are passionate about helping readers gain the confidence to take control of their finances by providing clear, well-researched information that breaks down otherwise complex topics into manageable bites. Related Articles