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How do I get out of a predatory car loan?
I have a car loan with an interest rate of 28%. My friend told me that this is borderline loan-sharking. How do I get out of this loan?
Eric Schad · Updated on
Reviewed by Shannon Martin, Licensed Insurance Agent.
Sorry to hear about your car loan.
Depending on your state, your lender could be above the legal limit for interest rates, breaking usury laws. Regardless of whether you fall victim to loan-sharking or not, your interest rate is definitely above average—even if your credit score puts you in the deep subprime category.
Because your interest rate is so high, you’re assuredly
upside down
on your car loan. Therefore, selling the car will leave a balance on your loan with a high-interest rate.The easiest way to get out of your situation is to pay your car loan off in full. However, you may not have the cash available to do that.
Next, you can refinance the vehicle. However, this will depend on your credit score and debt-to-income ratio. Given the interest rate you received, you probably got the loan when you either had bad credit or no credit. Hopefully, it’s risen since the beginning of the loan and you can get a better rate.
If that’s the case, shop around with lenders. Credit unions and local banks are a great place to start, and with any luck, one of them will refinance you.
To save even more money, you should also shop around for car insurance with
Jerry
. Using the app, you can compare dozens of rates from top insurance companies to find the best price. Use the savings to pay down your car loan further and watch your credit score rise and your debt disappear.View full answer
- Gregory R.
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Jerry partners with more than 50 insurance companies, but our content is independently researched, written, and fact-checked by our team of editors and agents. We aren’t paid for reviews or other content.
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