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How can I get out from under a car loan?
I financed a car about a year ago. At the time, I didn’t know much about personal finance or car loans, so I signed a loan with an interest rate of 25.9%. A year later, I know how outrageous the interest rate is. I’m trying to fix my finances. So how do I get out from under a car loan of this magnitude?
Eric Schad · Updated on
Reviewed by Shannon Martin, Licensed Insurance Agent.
A
car loan
interest rate of 25.9% is outrageous! But since you signed the contract, your only solace is to get out from under it. To get out of an upside-down car loan, pay more toward the principal each month, make extra payments whenever possible, or consider extra income streams.Although your first instinct might tell you to refinance, lenders will very rarely refinance a vehicle that’s so heavily underwater, especially with such a high interest rate to boot. So in this case, refinancing is off the table for the foreseeable future.
Instead, you should take all of your extra disposable income and put it toward the car loan. This could even mean a few bucks here or there. The idea is that you want to pay down the loan to the break-even point. The break-even point is where your car loan principal is equal to the amount that the car is worth. When you reach this point, refinancing becomes a possibility.
If you need some extra cash, taking on a second job or moonlighting can provide the cash flow you need. If a second job isn’t a possibility, you may want to take a look at your car insurance policy.
Each year, millions of Americans overpay on their auto insurance, unknowingly leaving money on the table. Don’t let this happen to you. Instead, search and compare quotes with the Jerry app.
As a licensed broker,
Jerry
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Jerry partners with more than 50 insurance companies, but our content is independently researched, written, and fact-checked by our team of editors and agents. We aren’t paid for reviews or other content.
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