Canadians wanting to get out of their current car loan can pay off the vehicle loan earlier, refinance or trade-in their vehicle for one with lower rates or sell their vehicle privately.
There are multiple reasons why a person might want to get out of their car loan early. Whether your loan payments are exceeding your budget, or the vehicle no longer suits your needs as a driver, life circumstances change and getting out of your car loan doesn’t have to be a difficult process. Canadians who want to exit their current car loan have a lot of options. However, as a borrower there are factors that should be considered before you act. If you want out of your car loan early, here are three methods to consider.
If you no longer want your vehicle and hope to get out of the loan completely, paying off the entire vehicle loan might be your best option. However, this option comes with an obvious price. In most car loan agreements, there’s a section that explains any penalties associated with an early payoff. The payoff price may significantly differ from the amount of money you’d be paying if you were to keep your car and continue paying off the loan. The payoff amount will depend on the contract between you and the lender. In some cases, an auto loan payoff is the remaining loan principle as well as interest rates.
READ MORE: 3 Ways to Pay Off Your Car Loan Faster
Contact your lender to discuss the payoff of your current loan – if it’s higher than what the market value of your vehicle is, you might want to reconsider paying off the loan in full and selling privately. If selling privately isn’t an option for you, assess your budget and ensure that you can afford to pay off the loan. Once you contact your lender and request a payoff quote, you typically will have 30 to 90 days until that quote expires. Ensure that you remain in communication with your lender but don’t request a payoff quote until you’re ready to pay back the entirety of your loan. Otherwise, you may be breaching the specific process that your lender has in place for an early loan exit, which could end up costing you more in the long run. If you decide to get out of your car loan early by paying it all back at once, request a copy of your credit score to ensure that the loan is marked as closed on your file.
Trading in a vehicle that isn’t paid off is an option for those who want to lower their monthly payments or get into a new vehicle that better fits their lifestyle. Dealerships are used to the trade-in process and will generally be happy to trade-in a vehicle that isn’t paid off if your auto loan history is fair and the car is in good condition. Ensure that you understand the new loan agreement for a trade-in before you sign. If you want to keep your current vehicle with a new loan, refinancing your auto loan will be a better option compared to trading in. However, this doesn’t necessarily mean easier. If you’re hoping to refinance your auto loan, the first thing you should do is request a copy of your credit report to see what you should expect when lenders view your history. If your credit score has approved over the duration of your auto loan, lenders will be more likely to refinance your loan with better monthly payments and rates. When you request a copy of your credit report, don’t just look at your score but check for errors too. Lenders don’t look into the nitty gritty of a person’s credit report, so if they see a mistake they’ll assume it’s true. It’s your job as the borrower to catch these mistakes to prevent them from having any impact on whether or not you’re approved for a solid refinanced loan.
Canadians on the hunt for a new auto loan have a 14-day window for shopping without having multiple hard hits on their credit report, which will lower your score. This window for shopping allows borrowers to compare offers from different lenders. If you meet the minimum requirement to apply for refinancing, you’ll likely have more than one offer. If you’re shopping for an auto loan that will be better on your wallet, try to accept the offer with the lowest interest rate. However, if you’re currently trying to get out of high monthly payments, look for a loan that has low monthly payments – even if this means a longer loan length, you’ll be doing your monthly budget a favour until you can afford to increase your payments and shorten your loan.
Selling your car privately isn’t always the quickest and easiest route if you want to get out of your car loan earlier, however a lot of people choose this method as the seller has complete control of the process. If this is an option that intrigues you, the first thing you should do is research online regarding the value of your car given its year, make, model and mileage. Look online to see how long some of the private car sales have been posted – selling your car online or through word-of-mouth can take a lot longer compared to other methods. If you decide to sell your car, you might want to pay off your car loan at the same time. If you sell your car for less than it’s worth, it’s still your responsibility to pay off the remainder of your loan. If you’re transferring your loan to a new individual, visit your bank to discuss your options.
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When selling privately, it’s your job as the owner to market your vehicle and ensure that repairs are made before the selling process begins. Visit your mechanic to sort out any repairs, and give the vehicle a good clean and detailing. If there any repairs that the mechanic suggests but you don’t follow through with, ensure that you include this information in the vehicle’s description. Selling a car privately can be time consuming, but there are things you can do to make your advertisement stand out – make sure your images online are good quality and include both interior and exterior pictures of the vehicle and provide a thorough and detailed description of the vehicle; otherwise potential car buyers may seem skeptical. Using online listing resources like Kijiji or Craigslist and posting your completed advertisement on your personal social media pages will expand your reach and could speed up the selling process.Canada Drives works with hundreds of Canadians every day, ensuring they get quality vehicles with ease and simplicity, regardless of their credit score. Getting approved for auto financing with bad credit can take several days, and even weeks, but Canada Drives’ dealer partners work hard to get applicants the best vehicle and financing options fast. If you need an affordable vehicle and want to rebuild your credit, apply with Canada Drives for free today and learn more!
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