How to Cancel an Auto Loan Contract

A car loan contract is a legally binding document. When you sign the contract, you agree to the terms listed until you pay off the auto lender. Once the lender is paid, you receive full ownership of the car, and you can do as you please. Canceling the contract before that point can be challenging, but there are several options available. These options include refinancing, prepaying and settling the debt.

Instructions

Refinancing to Cancel an Auto Loan

1

Get a prepayment quote from your auto lender. You can speak with the lender personally, or you may be able to find this online if you manage your auto loan through the Internet.

2

Locate a new dealer willing to extend you an auto loan. The new loan must be in a sum large enough to cover the remainder of your existing loan.

3

Contact your lender to inform them you will be prepaying on the loan.

4

Verify that the amount you have sourced in a new loan will cover the prepayment quote and any penalties.

5

Pay off the loan in one lump sum with the new loan.

6

Ensure your previous loan is closed by running a simple credit check. The loan should not be listed as active on your credit report.

Prepaying to Cancel an Auto Loan

7

Start with the same prepayment quote offered by your lender.

8

Save enough cash to cover this sum. Alternatively, you may consider selling the car to cover this sum if you no longer desire to own the vehicle.

9

Contact your lender to inform them of your intent to prepay.

10

Make arrangements to prepay.

11

Take the same steps to assure the contract is no longer on your credit score. Since you did not take a loan to prepay, you are debt free on the vehicle at this point.

Settle the Debt to Cancel an Auto Loan

12

Contact your lender to ask for a settlement quote. A settlement is lower than prepaying in full, but it will come with credit penalties.

13

Seek a settlement loan or save enough cash to cover the settlement quote.

14

Inform the lender of your intent to settle the debt.

15

Pay the lender the required settlement amount in one lump sum.

16

Monitor your credit to see the debt has been cancelled. You will see your credit score drop. This is a result of breaking a contract without paying the penalties.