If your car payments are higher or if you are ready to buy another car, you may feel it is time to end your current car loan. One of the most common barriers to doing this is negative capital, which means you have to pay more for a car than it is worth, for example, if the value of your car is offset by damages. This article will help you evaluate the condition of your loan and choose an option to end your car loan that is right for you.
1 Determine the market value of your car.
Since the biggest and most common obstacle to a car loan is negative capital, the best thing you can do is to determine whether you have negative capital or not. For this you need to find out how much your vehicle is worth. For a quick estimate of the value of your car, use any online price service such as Kelley Blue Book or NADA used car guides. On these free sites you can quickly and easily find an estimate based on the brand, model and condition of your car.
You can also search for classified ads and visit used car franchises to find out the price of your car (or similar vehicles).
To get a more accurate value from your car, find out what your vehicle’s mileage is, as well as other optional features (automatic windows, solar work, etc.) that you have equipped. Generally, if you have high mileage, your price is lower, while optional features can slightly increase the value of your car.
2 If your loan is not down market, sell your car.
Depending on how many payments you have already made for your car and how much its value varies, it may be more than the amount you still have to pay for the loan. In this case, what you can do is sell your car and use the profits to pay off the rest of your loan. You will no longer have debt, your credit will be uninfected and you will be able to buy a new car without any problems.
Contact your lender before selling your car. You will close your loan with your lender, so it’s important to keep it up to date. Your borrower can give you specific indications to close your loan. You may have to make the sale of the car in the loan institution so that you can immediately use the money from the sale to cancel the loan.
3 If the loan is for installments, prioritize.
Maybe you can’t sell your car, you can’t pay your loan in full. In this case you have several options, but you will have to decide what is most important to you. For example, if you want to end your car loan to reduce your monthly expenses, you may need to make a single advance payment to cover the remaining loan balance after selling your car. If you just want a new car, you might need to reach an agreement on how much money you will spend, pay more for more time. Neither of the following steps will make you complete your car loan. You won’t buy a new car either. It won’t cost you anything. It won’t let your credit history (it will allow you to meet some of the statements), but not all).
Refinancing means establishing a new loan contract with your borrower. It is also known as “debt restructuring”. If you’re going through financial hardship, it’s best to refinance your loan, rather than to stop paying. If your car loan inflates your monthly expenses, consider refinancing it, that is, you will still have to repay your loan, but with a new one you will have better facilities. Contact your borrower to negotiate the refinancing of your loan, try to lower the interest rate or lower your monthly installments on the new loan to an amount that you can comfortably afford. If this new loan makes a big difference in the stability of your economy, it will benefit you in the long run.
A good credit score will give you better opportunities to get a new loan. If you can, try to save money, pay off debt, etc. for a good time, because that way you can improve your credit score.
If you’re going to refinance, your borrower will “investigate” your credit history to decide if you’re approved. This research may have a negative impact on your credit rating, but it usually disappears in a few months, though the research will be visible on your credit report for two years.
5 Transfer your loan.
Depending on your bank’s regulations, you may be able to transfer your loan to someone you trust and let them accept your payments. It is a good choice if you want to sell a car that is not completely canceled for a friend, so you accept the payments. But you have to be careful and don’t just trust that the new owner will send you the money every month or you will pay the borrower on your behalf. If the new owner of the vehicle is not directly liable for payments, you will remain liable if he or she stops paying.
A good option is to approve the new owner for the amount of the purchase price of the vehicle. Then that person pays you the money you use to cancel your loan in a single payment (you may need more money if you are loan repayment). After you cancel your loan, you are free of all responsibility and the new owner is responsible for monthly payments.
Don’t forget that the new owner should also take responsibility for vehicle insurance.
6 Rent a new car.
If you are absolutely desperate to get a new car, but you can’t get the money, consider renting rather than buying. Talk to your borrower to change your negative capital balance for hiring a new car. Since a rent is significantly lower in payments than the self-financing loans, you can drive a new car and lower your monthly installments. If you make your payments monthly and complete the entire rental period, you will also have paid the installment installment loan. The downside is that you will be the owner of the new car, you will have to buy it back and buy it at a residual value or rent a new car.
Renting a new car has several advantages and disadvantages. The positive part is that your initial expenses will be lower due to the low monthly installments. In addition, you probably don’t have to deal with maintenance costs, depending on the lease agreement. Eventually you can drive such a new car every time. However, the cost of rented car insurance is higher than normal. In addition, you may be paid for excessive mileage or normally due to the use of your car. Most rentals include mileage payments of 10-15,000 miles a year. If you exceed that number, you can pay between 10 and 25 cents per additional mile.
Finally, the car is not really yours. If you tend to keep cars or work with them, you may not want to rent them.
7 Get Out
If there is nothing else you can do, that is, if you do not want to refinance a loan, you cannot sell your car to pay your debt and you are under too much financial strain on your loan to pay. Unfortunately you can lose your car. Tell your borrower that you cannot continue to pay the loan and that you will opt for a voluntary attachment. You will lose your car and your credit history will be exceeded, but when you volunteer your car, you will avoid being responsible for the cost of repairing the car by the agency in question.
The borrower will take possession of the car, sell it, and if the money from the sale does not cover the entire loan, it will request the remaining balance. If you do not pay the balance, a sentence will be issued against you for the amount you owe. Pay the balance, as the borrower can deliver a “debt cancellation” letter, which you can offer to future borrowers as proof that you have returned what was loaned to you.
An embargo, whether voluntary or not, will have a negative impact on your credit history for many years. It will therefore be more difficult to obtain other loans in the future and loans that you will be less favorable (in terms of interest rates, advances, etc.). If you can avoid paying off your loan, do so.
8 Cancel the loan.
Generally speaking, the best way to end a loan is simply to cancel it. In the long run, this is always the simplest and most economical option. If you have cash available, contact your lender immediately as you will be happy to negotiate a range of higher monthly payments or even a one-time payment transaction that allows you to pay the rest of the loan. It is a good idea if you have enough cash in your bank account and you want to reduce your monthly expenses, as if you just moved to a big city and plan to use the public service instead of your car.
As a general rule, pay your loans as soon as possible, a good idea, because you avoid the interests that can accumulate tremendously while the loan lasts. If you don’t have the cash, consider saving months or even years to get the money and therefore completely cancel the car debt. No one is angry to live without guilt.
- If you choose to sell the car to get out of debt, try to sell it on your own. In general, it is better to sell it to a private group than to reach a seller or sell to a seller.
- Keep in mind that all of these options that will help you complete a car loan will have a negative impact on your credit. If the most important thing for you is to keep a good credit or to fix bad credit, consider staying with the car until you can get rid of the loan, in a way that is not harmful to your credit history no.