How to get out of your car loan without ruining your credit

Key takeway:

• Keep payments current while you decide (payment history is the big lever).
• Refinance to lower your payment (best if you want to keep the car).
• Sell the car and pay off the loan (best if you’re not deeply upside down).
• Trade in strategically (works, but negative equity can follow you).
• Ask your lender about hardship options before you miss a payment.
• Loan assumption/transfer (rare, but worth checking).
• Treat voluntary surrender as a last resort, since it’s typically a serious negative credit event and can still leave you owing money.

If your car payment is stressing your budget, or you’re stuck with a car that doesn’t fit your life anymore, you’re probably looking for the cleanest exit.

The big rule: protect your payment history. Late payments and repossession can do far more damage than most “exit” strategies.

Compare your options at a glance

Option	Best for	The “watch out”
Refinance	You want to keep the car but need a lower payment	You may extend your payoff timeline
Sell (private sale or dealer buyout)	Sell (private sale or dealer buyout)	If you’re upside down, you must cover the gap
Trade in	You need a different vehicle now	Negative equity can roll into the next loan
Hardship plan	Your hardship is temporary	Terms vary — get details in writing
Loan assumption/transfer	You found someone to take the car	Many lenders don’t allow it
Voluntary surrender	You can’t keep or sell the car	Credit damage + possible remaining balance
Bankruptcy/legal route	Severe financial distress	Big decision — get legal advice

Start here: 5 numbers you need

Before you choose a path, gather:

1. Payoff quote (from your lender).
2. APR and months left on the loan.
3. Monthly payment.
4. Car value (private-party and trade-in).
5. Negative equity = payoff − car value.

Why this matters: Most “can I get out of this?” questions come down to one thing — how upside down you are.

A simple decision tree: pick the least painful path

• If you can afford the loan but it’s tight: Start with refinancing.
• If you can’t afford it and the car is worth about what you owe: Sell it.
• If you need a different vehicle now: Trade in carefully (and keep the new loan small).
• If you’re about to miss payments but your situation is temporary: Ask about a hardship plan.
• If you can’t keep it and can’t sell it: Consider voluntary surrender only after you’ve tried the above.

Option 1: Refinance (often the cleanest “credit-protection” move)

Refinancing replaces your current loan with a new one: ideally with a lower APR, lower payment, or both.

Will refinancing hurt your credit?

It can cause a hard inquiry, and that may lower your score a little temporarily. But if refinancing helps you avoid late payments, it may protect your credit overall.

Tip: If you’re rate shopping, do it in a tight window. Auto loan inquiries made within a 14- to 45-day period generally count as a single inquiry for scoring purposes (depending on the model).

What to compare (not just APR):

• Monthly payment.
• Loan term (months).
• Total interest over time.
• Any fees.
• Whether negative equity is allowed (if you’re upside down).

Option 2: Sell the car (private sale or dealer buyout)

Selling can be credit-neutral if the loan gets paid off as part of the process.

How it usually works:

• Ask your lender for a payoff quote (good through a date).
• Get a realistic value (private-party estimate and a dealer offer).
• If you’re upside down, plan for the gap (cash is usually simplest).

What to do next

• Get payoff instructions from your lender (who to pay, how they release the lien).
• Don’t hand over the car or title paperwork without proof the payoff is being handled.

Option 3: Trade in (good option if the new loan is truly better)

Trade-ins are common because they’re convenient. The risk is math, not paperwork.

The common pitfall: rolling negative equity into the next loan, which can increase:

• The amount you borrow.
• Your payment.
• The total interest you pay.

To keep a trade-in from becoming a trap

• Choose a less expensive vehicle if possible.
• Put money down to reduce or eliminate negative equity.
• Avoid stretching the loan term just to hit a monthly payment target.

Option 4: Ask your lender about hardship options (before you’re late)

If you’re headed for a missed payment, call the lender first. A hardship plan can help you avoid delinquency, which is one of the biggest drivers of credit damage.

Ask what’s available:

• Payment deferral.
• Due date change.
• Temporary payment reduction.
• Extension (adds months to the end of the loan).

Get clarity in writing

• Whether interest keeps accruing.
• Whether fees are added.
• What your next payment date will be.

Option 5: Loan assumption / transfer (rare, but worth checking)

Some loans allow someone else to take over the loan. Many don’t.

If it’s allowed, the most important question is: Are you released from responsibility?
Don’t rely on verbal confirmation; you want it in writing.

Option 6: Voluntary surrender (last resort)

Voluntary surrender can feel more controlled than repossession, but it can still be treated as a major negative credit event.

Experian explains that repossession or voluntary surrender can remain on your credit report for seven years.

You may still owe money after surrender

After the car is sold (often at auction), the sale proceeds are applied to what you owe. If they don’t cover the balance plus fees, you can be left with a deficiency balance.

If surrender is on the table, ask the lender:

• Whether they negotiate a settlement after sale.
• How and when the vehicle will be sold.
• What fees are added.
• How the deficiency balance is calculated.

Option 7: Legal options (for severe financial hardship)

If you’re in a serious financial crisis, a consumer bankruptcy attorney can help you understand your options. Bankruptcy is highly situation-dependent, and it’s not something to DIY based on a blog post.

7 ways to protect your credit while you exit the loan

These are the moves that matter most:

1. Keep paying while you decide (even one missed payment can start a chain reaction).
2. Call the lender early if you’ll be late.
3. Rate shop quickly (auto inquiries within 14–45 days generally count as one).
4. Get everything in writing (payoff quotes, hardship terms, loan release).
5. Avoid rolling negative equity into a new loan whenever possible.
6. Set autopay reminders for the transition month.
7. Check your credit reports afterward to ensure the old loan shows “paid/closed” correctly.

The bottom line

If your goal is to get out of a car loan without ruining your credit, prioritize the options that help you avoid missed payments:

• Refinance if keeping the car is still realistic.
• Sell if you can pay off the loan (or cover a manageable gap).
• Trade in only if the new loan improves your situation, not just the monthly payment.
• Call your lender early if you’re at risk of falling behind.
• Treat voluntary surrender as a last resort, since it can stay on your credit report for years and may leave you owing a deficiency balance.

FAQs: How to get out of a car loan

Does refinancing hurt your credit?

Checking your rate has no impact to your credit score.⁺ If you choose to accept an offer and go through the application process, it includes a hard inquiry.

Is it hard to sell a car with a loan?

It can take a few extra steps, but it’s common. The key is coordinating the payoff and lien release with the lender.

Is voluntary surrender better than repossession?

Either way, you’re likely facing a serious negative mark that can remain on your report for up to seven years.