How to get out of a bad car loan

Pay off the bad loan with a loan that’s financed at a better rate

  0 Premium content image

by

From the September/October 2014 issue of the magazine.

  0 Premium content image
Getty Images

Getty Images

Q: “I bought a Nissan Versa for $17,500. Because I have a poor credit rating, the dealer charged me 29% interest on my car loan. When the loan is finally paid off, the car will have cost me $34,000. I want to sell, but I think the car maybe worth less than the loan. What can I do?”—M. Fisher, Ottawa

A: You can pay off a consumer loan early with little penalty. So arrange a better financing deal with another lender—and get someone to co-sign if you have to. Then use the second loan to pay off the first. Or, sell the Versa and buy a cheaper car. But if what you owe on the Versa is more than its trade-in value, you’ll have to pay the difference by adding that amount to the new car loan. Also cancel any existing loan insurance and replacement value coverage directly with the providers and get a refund.

George Iny is the president of the Automobile Protection Association. Send him your automotive questions at ask@moneysense.ca.

Leave a comment

Your email address will not be published. Required fields are marked *