If you’re struggling to keep up your car loan payments or want a break from having a loan, what are your options? What can you do to settle the loan? We’re going to explain how to get our of a car loan in Canada whatever the situation may be.
There are a multitude of reasons why people want to get out of their car loans. It could be circumstances, the need for a better car, or you just want to minimize the amount of money going out each month.
Whatever the reason, there are a couple of ways to get out of a car loan. They all amount to the same thing though, paying off that car loan.
Paying off your car loan
The only way to get out of your current car loan without seriously damaging your credit score is to settle it. To pay it off early so you no longer have those monthly payments and the car is all yours free and clear.
How you go about that is up to you. You can:
Sell the car: If you can live without the car, you can sell it to settle the loan. As long as the value of the car exceeds the loan amount or you can top it up with cash, you can sell the car and pay off your car loan.
Use cash to pay off the loan: If you have savings or have come into money, you can use that to pay off the car loan. As long as you don’t empty your savings pot and still have cash for a rainy day, this can be the best way to pay off the debt.
Switch to a cheaper loan: If you have a bad credit car loan and have improved your credit score enough to qualify for a cheaper loan, you can refinance. We do this a lot. A customer has a bad credit car loan for 12 or 24 months, improves their credit score and then applies for a new cheaper loan.
Refinance the loan: Refinancing is the same as the point above but for different reasons. You can refinance the loan for lower monthly payments, a shorter loan term or if you need extra money for something else.
Early Repayment Penalties
If you want to get out of your current car loan, make sure to check your current loan for prepayment penalties. Some lenders add these penalties to offset any interest losses on a loan.
Not all lenders use them and those that do vary in the amount they charge. Make sure you know what potential penalty you’re in for before settling.
Hopefully you know a little more about how to get out of a car loan. If you need any more help getting out of your loan, please contact us here an we’ll be in touch!