"Can I cancel a car loan? "
I'm starting to have some second doubts about my car loan. Can it be canceled?
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Answered on Apr 05, 2021
Jim Donaher is a freelance writer and manager with over 35 years' experience in the insurance, banking, and investment management businesses. He provides expertise on a range of topics and is able to explain complex industry information in layman's terms. Jim is the author of two books, including Call Him, He's Home: A Guide to Prayer for Regular People and Then Larry Smiled, a novel about life, death, accountability, and salvation. Taormina, Sicily is his happy place!
“Once you have signed the loan agreement and taken delivery of your car, you generally cannot cancel the loan. The one rare exception is when there is a cancellation clause in the contract. This means borrowers have a small window — usually just a few days — to return their car with no questions asked, though there may be penalties.
Lenders may not call attention to the cancellation clause, so you will need to read your loan agreement to see if it’s there and what its terms are.
While the majority of borrowers cannot cancel their loan, they can opt for one of three ways to get rid of their car to get out of their loan:
- Trade-in: You can try trading in your vehicle for another car. If your ride is worth more than what you owe on it, you could apply the difference toward the purchase of a new vehicle.
- Voluntary repossession: This involves bringing the car back to the seller and breaking your contract. This option will have a major negative impact on your credit, and you will remain responsible for the outstanding balance after the dealer sells your car.
- Private sale: You can sell the car yourself. If you set the price for what you owe on your loan, and the car is new, it may be too expensive for potential buyers to stomach. That’s because depreciation kicked in the moment you drove the car off the lot, so you would be charging a new-car price for a used car. Whatever you get for your vehicle, you can use it to pay down your loan balance. “
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