Are you dealing with a car or truck loan that is disadvantageous or too expensive? You don’t have to keep paying for a loan that doesn’t fit your budget. Let’s look at some strategies on how to get out of a bad car loan.

First, Know Your Car’s Value

The first step is to find out the value of your car compared to how much you owe on your car loan. Kelley Blue Book and NADA Guides are resources that can give you the current value of your car. Next, call your lender and ask how much you owe on your current loan.

Upside Down Or Right Side Up?

If the value of your car is less than what you owe on your loan, then you are “upside down” on your vehicle loan. This can be a complicated situation since the value of your car continues to decline (or depreciate) with time.

Should You Sell Your Car?

If the value of your car is greater than what you owe (“right side up”) then you can sell your car and pay off the entire loan. You might even have some cash left over. If you are “upside down” on your vehicle loan, you will only be able to pay off a portion of the loan. However, you might be able to refinance the remaining balance with smaller monthly payments. Before you sell, ask your lender about any refinancing options available to you.

Refinancing Your Loan

If your original loan was taken out with a high interest rate, you might be able to refinance your car loan with another lender. This could reduce your monthly payments and even save you thousands of dollars over the new loan period.

You can ask about refinancing from banks, credit unions, or online lending services. One of the best ways to get lower rates is through car refinancing networks, like CARCHEX. These services contact and compare nearly one hundred different lenders to make sure you get the best interest rate (APR). Refinancing networks also save you time since you don’t have to go asking each lender one-by-one about rates.

Think About Leasing

This option can follow the sale of a car that is “upside down” on its loan. You might be able to roll over the remaining balance into a new car lease. Leasing is similar to renting a car long term with the option to buy at the end of the lease term. One disadvantage is when the lease ends; you have to return the car. On the plus side, monthly payments on leases are often lower than auto finance loans.

Home Equity Options

If you own your home or are paying a mortgage, you can look into home equity options to pay off your car loan. This means that you take out a new loan against the value of your home or what you have paid so far in mortgage payments (equity).

Get All The Numbers

Before you make any decisions, get all the data you need up front, especially information about early termination, transaction, and state registration fees.


There is no reason to stay stuck in a bad car loan. Consider all the alternatives carefully before you decide. One easy place to start is with a car refinance network, like CARCHEX, since everything is done online, and you can get an answer quickly.

About The Author


Joe Campanella is the EVP of Business Development for CARCHEX and oversees partner relationships. Joe possesses 12+ years of experience building sales/customer service teams and securing strategic partnerships. He is a sports enthusiast who enjoys mountain biking, surfing and snowboarding in his spare time.

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