11 mins read 
Key takeaways
- The best way to protect your credit is to keep making payments while you compare options.
- If you want to keep the car, refinancing may help lower your monthly payment or interest rate.
- If you don’t want the car anymore, selling it and paying off the loan is usually cleaner than giving it back to the lender.
- If you owe more than the car is worth, you’ll need to deal with the negative equity before you can fully get out of the loan.
- Voluntary surrender should usually be a last resort because it can still hurt your credit and may leave you owing money.
When your car loan no longer works for your budget, the worst thing you can do is wait until you miss a payment. A late payment, default or repossession can hurt your credit and make future borrowing harder.
The better move is to compare your options while your loan is still current. Depending on your situation, you may be able to refinance, sell the car, trade it in, ask your lender for hardship help or choose another path that limits credit damage.
Here’s how to think through your choices.
Best ways to get out of a car loan, ranked by credit risk
| Option | Credit risk | Best if | Watch out for |
|---|---|---|---|
| Refinance the loan | Low to moderate | You want to keep the car but need a lower payment | A longer term can cost more over time |
| Sell the car | Low, if the loan is paid off correctly | The car is worth close to what you owe | You may need cash to cover the payoff gap |
| Trade in the car | Moderate | You need another car now | Negative equity can follow you into the next loan |
| Ask for hardship help | Low to moderate | Your money problem is temporary | Interest or fees may still add up |
| Transfer the loan | Varies | Your lender allows someone else to take over the loan | You need written release from the lender |
| Voluntary surrender | High | You’ve exhausted other options | It can hurt your credit and may not clear the debt |
| Bankruptcy or legal help | High/complex | You’re dealing with broader debt problems | You’ll want professional legal advice |
Start with these numbers
Before you choose an option, gather five numbers:
- Your current loan payoff amount. This is the amount needed to fully pay off the loan today.
- Your car’s estimated value. Check a few trusted sources so you have a realistic range.
- Your interest rate and monthly payment.
- Your remaining loan term.
- Your monthly budget. Know what payment you can actually afford.
Then compare your payoff amount with your car’s value. If your payoff is higher than the car’s value, you’re dealing with negative equity. That doesn’t mean you’re stuck, but it does affect which option makes the most sense.
If you want to keep the car: see if refinancing can lower the payment
If your main problem is the monthly payment — not the car itself — refinancing may be the cleanest place to start.
When you refinance, you replace your current auto loan with a new one. If you qualify for a lower rate, a longer term or both, your monthly payment may go down. That can give your budget breathing room and help you avoid late payments.
Refinancing may make sense if:
- Your credit has improved since you got the loan.
- Interest rates are lower than when you first financed the car.
- Your income or debt situation has changed.
- Your payment is too high, but you still want to keep the vehicle.
- You’re trying to avoid missed payments or repossession.
You can use Caribou’s auto refinance calculator to compare your current loan with a possible new one. Focus on both the monthly payment and total loan cost. A lower payment can help, but stretching the loan too long may mean paying more interest over time.
Refinancing may involve a credit check, but that doesn’t automatically mean it’s bad for your credit. If a new loan helps you keep payments on time, the short-term impact may be worth it.
If you don’t want the car anymore: consider selling it
Selling the car may be a good option if you’re ready to get out of the vehicle entirely. The goal is simple: sell the car, use the proceeds to pay off the loan and avoid late payments or repossession.
This usually works best when the car is worth about the same as, or more than, your payoff amount.
For example:
| Car value | Loan payoff | What it means |
|---|---|---|
| $18,000 | $15,500 | You may have money left after payoff |
| $18,000 | $18,000 | Sale may fully cover the loan |
| $18,000 | $21,000 | You’ll need to cover a $3,000 gap |
If you sell the car privately, contact your lender first so you know the exact payoff process. The lender may need to release the title after the loan is paid. If you’re selling to a dealer or online car buyer, they may handle the payoff directly, but you should still confirm every number in writing.
If you owe more than the car is worth: slow down before trading in
Trading in your car can feel like an easy escape, but it can get expensive if you have negative equity.
If the dealer pays less for your car than you owe, the difference may be rolled into your next loan. That can make the new loan larger, raise your payment and keep you underwater longer.
For example, if you owe $25,000 and your trade-in is worth $20,000, you have $5,000 in negative equity. If that $5,000 gets added to your next loan, you’re starting the new loan behind.
That doesn’t mean trading in is always wrong. It just means you should do the math first. Caribou’s article on negative equity rollover math can help you see how rolling $5,000, $10,000 or $15,000 into another loan changes the cost.
If the payment is the problem: compare ways to lower it
Sometimes you don’t need to get out of the loan completely. You just need the payment to stop squeezing your budget.
In that case, compare a few options:
| Option | How it may help | Best for |
|---|---|---|
| Refinance | May lower your rate, payment or both | Long-term payment relief |
| Extend the loan term | May lower the monthly payment | Short-term budget pressure |
| Make a lump-sum payment | May reduce your balance | Drivers with savings available |
| Cut other car costs | Frees up room in your budget | Insurance, gas or maintenance pressure |
| Defer a payment | May pause payment temporarily | Short-term hardship |
If your car payment is too high, it’s worth looking at the broader budget too. A lower loan payment can help, but so can cutting insurance, fuel, maintenance or other vehicle costs. Caribou’s article on what to do if your car payment is too high goes deeper on those choices.
If you’re about to miss a payment: call your lender first
If you think you’ll miss a payment, contact your lender before the due date. It’s much easier to ask for help while the account is still current.
You can ask about:
- A due-date change
- A payment extension
- A temporary hardship plan
- Payment deferral
- Reduced or interest-only payments for a short period
Get the terms in writing before agreeing. You’ll want to know whether interest keeps adding up, whether fees apply and when regular payments restart.
A deferment can help if the issue is temporary, but it’s not free money. It usually moves the payment to a later date and may increase the total amount you pay.
Can you transfer a car loan to someone else?
Sometimes, but it depends on your lender.
Most auto loans can’t simply be handed over to another person. Even if someone else agrees to make the payments, you may still be legally responsible unless the lender formally releases you.
That means an informal arrangement can be risky. If the other person stops paying, your credit could be affected.
Before you let someone take over the car or payments, ask your lender whether loan assumption or transfer is allowed. Make sure any agreement is official and in writing.
Voluntary surrender should be a last resort
Voluntary surrender means you give the car back to the lender instead of waiting for repossession. It may reduce some repossession costs, but it can still seriously hurt your credit.
It also may not erase the debt. After the lender sells the car, you could still owe the difference between the sale price and your loan balance. That difference is called a deficiency balance.
Voluntary surrender may be worth discussing if you’ve already tried refinancing, selling, trading in and hardship options — and you still can’t afford the loan. But it’s usually not the first move if your goal is to protect your credit.
What not to do if you want to protect your credit
Avoid these moves if possible:
- Don’t stop paying without calling your lender. Late payments can damage your credit quickly.
- Don’t hide the car or ignore lender calls. That can make the situation harder to fix.
- Don’t roll negative equity into a new loan without doing the math. You may end up with a bigger payment and a longer debt cycle.
- Don’t let someone else “take over payments” without lender approval. You may still be responsible.
- Don’t assume surrender clears the loan. You may still owe money after the car is sold.
A simple decision tree
Use this as a starting point:
| Your situation | First option to consider |
|---|---|
| You want to keep the car but need a lower payment | Refinance |
| You don’t want the car and it’s worth close to what you owe | Sell it and pay off the loan |
| You need another car now | Trade in, but check negative equity first |
| You’re temporarily short on cash | Ask about hardship or deferral options |
| You’re about to miss a payment | Call your lender before the due date |
| You can’t afford the loan at all | Compare selling, hardship, surrender and legal advice |
Bottom line
The best way to get out of a car loan without ruining your credit is to act before the loan becomes late or delinquent.
If you want to keep the car, start by seeing whether refinancing could lower your payment. If you don’t want the car anymore, selling it and paying off the loan may be the cleanest path. If you’re upside down, compare your payoff, car value and budget before trading in or rolling debt into another loan.
The earlier you act, the more options you usually have.
FAQs: How to get out of your car loan without ruining your credit
What’s the best way to get out of a car loan without hurting your credit?
The best option depends on whether you want to keep the car. If you do, refinancing may help lower your payment and keep the account current. If you don’t, selling the car and paying off the loan is usually cleaner than surrendering it. The main goal is to avoid late payments, default or repossession.
Can I give my car back to the lender without ruining my credit?
Giving the car back is called voluntary surrender. It may be better than an involuntary repossession in some ways, but it can still hurt your credit. You may also owe a remaining balance after the lender sells the car.
Is it better to refinance or sell my car?
Refinancing may be better if you want to keep the car and can qualify for a lower payment or better terms. Selling may be better if you don’t want the car anymore and the sale price can cover most or all of your loan payoff.
Can I trade in a car I still owe money on?
Yes, you can trade in a car with a loan, but the loan must be paid off as part of the transaction. If you owe more than the car is worth, the negative equity may be added to your next loan, which can make the new loan more expensive.
What should I do if I’m about to miss a car payment?
Call your lender before the payment is late. Ask about hardship programs, due-date changes, deferral or payment extensions. Get any agreement in writing so you understand the fees, interest and repayment terms.
Will refinancing my car hurt my credit?
Refinancing may involve a hard credit inquiry, which can have a short-term impact. But if refinancing helps you avoid missed payments and keep the loan current, it may help protect your credit over time.
Can I get out of a car loan if I’m upside down?
Yes, but your options may be more limited. You can pay the difference, sell the car and cover the gap, refinance if eligible, or trade in the car and roll the negative equity into the next loan. Rolling negative equity forward can be costly, so compare the numbers carefully.
