There is nothing worse than buying a car, being excited for a couple of days, and then realizing that you made a huge mistake. A bad car loan can quickly sap all your energy, while also causing financial worries. Even though you may think there is no solution, there are several things you can consider. Here are five ways to get over a bad car loan:
1. Stick it out. Rather than worry about the mistake you made and what it will mean to the future, come to grips with your situation and do what you can to make it work. You may find out soon enough that your loan isn’t all that bad. Assess your finances and see if you have the ability to continue paying it and pay extra on it to pay it off quickly.
2. Refinance your loan as soon as possible. Did you opt for a loan with an interest rate that is entirely too high for somebody with your credit score? In this case, you can better your situation by refinancing. When you do this, you are going to find yourself paying less in interest every month. In turn, this means a lower monthly payment. Credit unions are typically the best place to look for a car loan. They have great rates, they finance used cars at good interest rates, and they generally specialize in all different types of car loans for all types of people.
3. Trade in your car and start over new. While this is something you may want to consider, you have to be well aware of the ramifications. Even if you only have a few hundred miles on the vehicle, the moment it was driven off the lot, it decreased in value. For this reason, if you attempt to trade in the vehicle, you are probably not going to receive as much money in return as you paid for it. In this case you are stuck at a crossroads. You can forget about trading your car in, or you can negotiate with the dealer to minimize the “hit” that you will take. At the very least, consider the pros and cons of both options and then make the decision that will better your situation. If it means not having a huge car payment that will put a strain on your finances for years to come, they you should probably take the initial hit and dump it.
4. Become a private party seller. If you are going to lose too much money trading your car in, consider selling it on your own instead of potentially getting ripped off by a car dealer. This takes a lot more work on your part, but generally speaking, you should be able to get more money in the end. Many people have had success selling their car on Craigslist, eBay, and the Auto Trader. Just make sure you are aware of deals that sound too good to be true. If someone is trying to do a deal with you that sounds weird or unconventional, it’s probably a scam.
Tip: Check out Kelley Blue Book for more information on the trade in and private party value of your vehicle.
5. Start paying extra on your loan. By doing this, you are going to speed up the loan repayment process. In turn, you will not pay nearly as much interest. Even if you only send a few extra dollars every month, this will help to shave principal off of your loan.
Is the Dealer at Fault?
Unfortunately, dealer finance departments are not always 100 percent honest with consumers. It is their job to close the sale, while also doing what they can to tack on extras such as an extended warranty and gap insurance. Although you probably can’t return your vehicle, if you feel like the finance department duped you into a bad deal, it is within your rights to call the dealer to speak with the general manager. At the very least, this will give you a chance to explain what happened and get a better idea if the dealer can do anything for you. Check with your local better business bureau to see if your state has any return policies for consumers who were given outlandish financing terms.
If you are stuck with what you perceive to be a bad car loan, the five tips above may be able to help better your situation. Do any of you have experience with this? If so, how did you overcome your loan?