How to Get Out of a High-Interest Car Loan

Aug 2

Feeling stuck in a car loan with sky-high interest? You’re not alone—and you’re not out of options.

A high-interest car loan can drain your budget, limit your flexibility, and make it tough to build financial momentum. But whether you got stuck with a bad deal, had no credit at the time, or just didn’t know better—there are clear ways out. And yes, even if you’re working with used vehicle financing, limited credit, or are just now getting vehicle loan approval, it’s possible to fix things.

Here’s how to break free and start fresh—with fewer payments and a whole lot less interest.

1. Know Exactly What You’re Paying

Before you can escape a high-interest car loan, you’ve gotta understand how bad it really is.

Grab your loan statement and look for:

Your current interest rate (APR)
Your remaining loan balance
The monthly payment
The number of months left on the loan

Then, use a calculate car payments tool or a car loan interest calculator to estimate:

How much interest you’ll pay over the rest of the term
How much you’ve already paid in total

Sometimes, the numbers are worse than they appear—and that realization is what fuels the change.

2. Consider Refinancing Your Car Loan

Refinancing is one of the most common (and effective) ways to get out of a high-interest loan.

Here’s how it works:

You apply for a new loan with better terms
That loan pays off your current high-interest loan
You now make payments to the new lender—at a lower interest rate

You can apply for a car loan online to refinance with services like AutoPlug, which cater to all credit types—including those with no credit or lower scores. Even a small drop in your APR can save you thousands over the remaining life of the loan.

Example:

Original loan: $18,000 at 12% over 60 months = $400/month
Refinance to 7% = $360/month
That’s $2,400 saved in interest!

3. Boost Your Credit Score Before Applying

If your credit was shaky when you got your loan, chances are you’re paying for it—literally. The good news? Time, consistent payments, and small improvements can bump up your score.

Before refinancing or applying for used vehicle financing, try these:

Pay off (or reduce) credit card balances
Dispute any credit report errors
Don’t open new accounts unless necessary
Keep making on-time car payments

Even a 30–50 point increase can open the door to better refinance options.

4. Make a Lump-Sum Payment (If Possible)

If you’re stuck in a high-interest loan but can’t refinance yet, consider making a one-time extra payment toward the principal.

Why it works:

Reduces the total balance you’re paying interest on
Shortens your loan term
Lowers overall interest paid

Just make sure your lender applies the payment directly to the principal, not toward future interest or skipped payments.

5. Sell or Trade the Vehicle

If refinancing isn’t an option and the monthly strain is too high, you might consider selling or trading in the vehicle. This works best when:

Your car’s market value is close to (or higher than) your loan balance
You’re okay switching to a more affordable vehicle

Even if you owe more than the car is worth (called negative equity), some dealers will let you roll the remaining balance into a newer loan—ideally with a lower rate. It’s not perfect, but it can be a lifeline.

Use a trade-in estimator and calculator to weigh your options carefully before deciding.

6. Look Into No Credit or Second-Chance Lenders

If your credit hasn’t bounced back yet, don’t assume you’re out of options. Some lenders—especially online or alternative platforms—specialize in no credit car loan approvals or second-chance auto loans.

These lenders often:

Work with self-employed or gig workers
Accept past bankruptcies
Approve without co-signers
Offer flexible term lengths

You can compare these offers through platforms like AutoPlug, which match borrowers with lenders across Canada based on their real-life credit and income situation.

Final Thoughts

A high-interest car loan might feel like a trap—but it doesn’t have to be a lifelong sentence. From refinancing to downsizing, to boosting your credit or switching lenders entirely, there are options to take back control.

The key? Know your numbers, weigh your options, and don’t be afraid to apply for better terms—especially online. The right move today could save you thousands tomorrow.

Ready to explore refinancing or apply online for a smarter car loan? AutoPlug helps Canadians—no matter their credit—get approved fast, compare real offers, and lower their monthly costs.