How to Get Rid of Car Loan Debt

An automobile loan is a secured debt with the car serving as collateral. The secured nature of the loan makes it difficult to get rid of the car loan except by paying it off. Popular tactics used to eliminate unsecured debt, such as debt settlement on credit cards, do not apply to secured loans. If you default on a car loan, the lender can repossess the car and still hold you responsible for a portion of the debt.

Instructions

1

Contact the bank to ask for the payoff amount on the car loan. Pay the balance using cash from your savings or checking account.

2

Sell the car if you don't have enough cash to pay off the loan. The selling price must be sufficient to pay off the loan. Or you can make up the difference with cash.

3

Call the lender to arrange for a "voluntary repossession." Tell the lender that you can no longer afford the car and wish to turn it in. The lender will make arrangements for you to surrender the car. Typically the lender will sell the car, perhaps at auction, and you could be held responsible for any difference in the selling price and the loan balance. That's called a "deficiency balance." Make arrangements with the lender to pay off this amount to complete the elimination of your car loan debt. According to the Federal Trade Commission, the lender could also decide to simply keep the car -- relieving you of any further responsibility for the loan. A private or public sale is more likely, however.