Options When You Can’t Afford Your Car Payment
Getting a car can be considered an investment, but it can also be a lifetime liability. People who can’t afford their car payments have several options, but not many of them know these options.
This article will discuss everything you can do when you can’t afford your car payment.
What Happens When I Miss a Car Loan Payment?
The situation will depend on the terms of your loan, but generally, you will have a few days to make the payment before the lender reports it as delinquent. After that, the account will be 30 days past due, and the lender may begin charging late fees.
If you miss another payment, the account will be 60 days past due, and the lender may begin pursuing repossession.
Moreover, each late payment will be reported to the credit bureaus, which will damage your credit score.
Missed car loan payments also depend on the car dealer you got the loan from. Some dealers may work with you if you miss a payment, but others will immediately begin the repossession process.
Ask Your Lender About Financial Support Options
The first way you can try to avoid missing a payment is to talk to your lender about your options. Some lenders may be willing to work with you if they know you’re struggling.
For example, some lenders may offer a deferment or forbearance, which allows you to temporarily stop making payments or make smaller payments. These options can give you some breathing room so that you can get back on track.
When working out on payment plan with your lender, be sure to get the terms in writing so that you know exactly what is expected of you. It is also important to make sure that you keep up with your payments so that you don’t damage your credit any further.
Refinance Your Car Loan
Another option is to refinance your car loan. This means taking out a new loan with different terms, such as a lower interest rate or a longer repayment period.
Refinancing can help you lower your monthly payments, but it’s important to keep in mind that you may end up paying more interest over the life of the loan.
When you refinance your car loan, these steps should be taken:
- Get quotes from multiple lenders: You can use an online marketplace like Credible to compare rates from multiple lenders at once.
- Choose the right loan term: A longer loan term will lower your monthly payments, but you’ll pay more in interest over time. A shorter loan term will do the opposite.
- Pick the right lender: In addition to finding a lender with low rates, you’ll also want to make sure that they have a good reputation and are easy to work with.
Sell, Trade, or Try Transit
Although selling your car to pay off your car loan can be a hard choice to make, sometimes it can be the best option.
You can also try trading in your car for a less expensive model. This may help you lower your monthly payments, but it’s important to make sure that you’re not upside down on your loan, which means you owe more than the car is worth.
Selling Your Vehicle
When you decide to sell your car, you’ll need to pay off your loan first. Once you’ve done that, you can sell the car and use the money to pay off any other debts you may have.
When selling your car, there are some things you need to consider such as:
- How much is my car worth? Use an online tool like Kelley Blue Book or NADA Guides to find out how much your car is worth.
- What are the taxes and fees? You’ll need to pay taxes on the sale of your car, as well as any fees associated with the transfer of ownership.
- How will I get around? Once you sell your car, you’ll need to find another way to get around. This may mean using public transportation, ride-sharing services, or carpooling.
Trading In Your Vehicle
If you decide to trade in your car, you’ll need to find a dealer who is willing to take it as a trade-in. Keep in mind that you may not get as much for your car as you would if you sold it outright, but it can be a good option if you’re looking to upgrade to a new car anyway.
When you trade in your car, there are some things you need to consider first, such as your trade-in value. Trade-in value is the amount of money a dealer is willing to give you for your car.
This can be calculated using an online trade-in calculator, such as the one from Edmunds. Keep in mind that the trade-in value is usually lower than the private party sale value, so you may not get as much money for your car as you would if you sold it yourself.
If you live in a city with public transportation, consider ditching your car altogether and taking advantage of transit options. This can save you a lot of money each month, and it’s good for the environment too!
Of course, using transit isn’t always an option, but it’s worth considering if you’re struggling to afford your car payments.
Using Home Equity and HELOC to Pay Car Loan
Home equity is a type of collateralized loan where your home is used as collateral. This means that if you default on the loan, your lender could foreclose on your home.
A HELOC is a home equity line of credit, which is a revolving line of credit that you can borrow against as needed.
You can use home equity or a HELOC to pay off your car loan, but it’s important to keep in mind that you’re putting your home at risk if you do this.
When computing your home equity, you can use an online home equity calculator. Another option is you may talk to a loan specialist at your bank to get pre-qualified for a home equity loan or HELOC.
If you have good credit, you may be able to take out a personal loan to pay off your car loan. Personal loans usually have lower interest rates than auto loans, so this can be a good option if you’re looking to save money on interest.
You can use a tool like Credible to compare personal loan rates from multiple lenders at once.
It’s important to note that personal loans are not secured by your car, so if you default on the loan, your lender cannot repossess your car. However, they can still take legal action against you to try and collect the debt.
When all else fails, you can always try voluntary repossession. This is when you return the car to the lender and let them repossess it.
It’s important to note that this will damage your credit, but it may be a better option than having the car repossessed anyway.
When you do voluntary repossession, you can also try to negotiate with the lender for a deficiency judgment, which is when the lender agrees not to pursue you for the remaining balance of the loan.
File for Bankruptcy
Last but not the least, you can always file for bankruptcy. This is the last resort option, but it can help you get out of your car loan if you’re unable to make the payments.
Keep in mind that filing for bankruptcy will damage your credit, so it’s not an option to be taken lightly. In addition, you may not be able to keep your car if you file for bankruptcy.
If you’re considering bankruptcy, it’s important to talk to an attorney first. They can help you understand the process and what to expect.
Which Option Suits You?
There are a number of options available to you if you’re struggling to make your car payments. The ones we highlighted in this article are just some of the few.
When it comes to finding options when you can no longer pay your car loans, Centennial Funding is glad to offer our services as a reputable auto loan financing company. We are proud to be able to help so many people with all different types of situations, including those who have lost their job or had some other type of financial setback that has made it difficult for them to keep up with their monthly payments.
We understand that things happen and sometimes it is out of your control. That is why we are here to help. We can work with you to get you the financing you need so that you can keep your car and get back on track financially. Give us a call today to learn more about what we can do for you.
If you’re struggling to make your car payments, we hope this article has helped give you some clarity on the options available to you. We wish you the best of luck in finding a solution that works for you!