How to Cancel a Car Loan

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Meghan Carbary has been writing professionally for nearly 20 years. A published journalist in three states, Meghan honed her skills as a feature writer and sports editor. She has now expanded her skill-set into the automotive industry as a content writer for Auto Credit Express, where she contributes to several automotive and auto finance blogs.


, - January 27, 2020

There's no such thing as cancelling a car loan. You can't just bring a vehicle back to a dealership, hand over the keys, and state that you won't be making payments anymore. However, this doesn't mean that there's no way you can get out of an auto loan that isn't working for you.

Why Do You Want to Cancel Your Car Loan?

Determining the best course of action to get out of an unwanted car loan largely depends on why you want to be done with this situation. Let's look at some scenarios, and what you can do to effectively "cancel" your auto loan:

  • You can't afford your monthly payment – If you love your vehicle, but it's the monthly payment that has you thinking about cancellation, you may want to consider refinancing. Depending on how long you've had your loan, and whether or not your credit score has improved, you might qualify for a lower monthly payment through refinancing. In refinancing, you can lower your payment with a new contract by either getting a lower interest rate or extending your loan term.
  • Financing isn't for you – If you took on a car loan and decided that financing just isn't for you, you might be in a tough spot. Depending on when you took out the loan, you may have an option or two. If you've just gotten your vehicle and have buyer's remorse, you may be able to return it, no questions asked, if this is explicitly outlined in your contract. However, dealerships and lenders are under no obligation to do this, and typically don't. It's rare to find a loan that offers this option. Your other option, again, if it's allowed by your lender, is to have someone assume your loan. Loan assumption means you find someone to take your car and take over your loan. If the lender allows it, the new borrower has to qualify under terms that are already in place.
  • Financing's fine, the car isn't – When you want to be rid of a vehicle, you generally have several options for getting out of one and into something else. If you have been having problems with it from day one, you can look into your state's lemon laws to see if you have any recourse. Typically, the vehicle has to have a defect which is covered by the warranty and occurs within a specific amount of time after purchase, and persists despite several repairs.
  • You just want a different vehicle – If you're just looking for a different car, you can usually trade your current vehicle in for another one, or sell it yourself. The key in both of these situations is that your existing loan needs to be paid off. This works best if there's equity in your car. Having equity means that the vehicle is worth more than you owe on the loan. If you decide to trade in your car, the dealer will pay your loan balance and either give you the difference or apply it toward a down payment on your next vehicle. If you sell the car privately, you're responsible for repaying the lender and handling the paperwork.

You can see from this list that you have several options for getting out of an auto loan that isn't working for you, as long as you do it the right way. Whatever your reason for wanting to be out of your car loan, it's important that you keep communicating with your lender throughout the process.

One situation you don't want to find yourself in is when your lender doesn't know you're looking to make a change. This could result in loan default if you stop making payments, and ultimately, repossession. Repossession negatively affects your credit score, and stays on your credit reports for seven years.

Replacing a Car Loan You No Longer Want

Since you can't really cancel an auto loan, it's good to know how to get out of a vehicle loan properly in order to avoid negatively affecting your credit reports and score. These impacts could, in turn, affect your ability to get another car loan. If you're already dealing with bad credit, this is especially important.

As a bad credit borrower, you need to find a dealership that's equipped with the lenders that can work with your situation. These dealers don't always stand out in the crowd, so it's important to have someone like CarsDirect on your side.

We work with a nationwide network of special finance dealerships, and we want to help you find one in your area. This way, you have a better chance at getting into a new loan you'll love.

Don't wait it out any longer than necessary in an auto loan you'd rather cancel. Instead, fill out our easy, zero-obligation car loan request form, and we'll get to work finding you a local dealer.

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Meghan Carbary has been writing professionally for nearly 20 years. A published journalist in three states, Meghan honed her skills as a feature writer and sports editor. She has now expanded her skill-set into the automotive industry as a content writer for Auto Credit Express, where she contributes to several automotive and auto finance blogs.


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