We all hit hard times. Trying to make ends meet and pay bills while still balancing a happy, healthy life can be difficult at any time and be nearly impossible at the worst of times.
What happens, however, when the balance sheet is just not adding up? What do you do if, when this happens, the one big red area that you know you simply can no longer afford is your vehicle?
We know that having a vehicle is an important part of your life. You have to get to work and get your kids to school. You also have to be able to go to doctor appointments and run errands.
Unless you live in a major metropolitan area with adequate public transportation, going without a car simply isn’t always an option.
So what do you do when you can no longer afford your car payments? Let’s take a look at some of the things you can do to remedy the issue quickly. We’ll also look at how you can avoid it in the future.
There is no use in sitting on the news. Once you realize that you’re going to have trouble making your auto payments, it’s best to leap into action quickly.
Take steps early to ensure that you can keep your vehicle. As a last resort, you want to be able to get out from under your payments.
Call Your Lender
It is important to realize that, from a purely cold economic standpoint, lenders make the most money when you successfully make your car payments. That’s the case even if this means they have to work with you to achieve that goal.
So, the first thing you should do when you realize you’re having trouble making your payments is to get your lender on the phone. Let them know that you’re having trouble making payments and that you need some assistance.
There are often several ways they can help you. This includes deferring payments. That entails giving you a break of a month or two. They would then tack on the payments on the end of the loan.
Some lenders will also let you make smaller payments for a shorter period of time.
Note however, that these tools will only help you temporarily. If you’re having ongoing financial issues, it may be appropriate to continue reading.
Trade in Your Vehicle
Trading in your current vehicle for one with a lower overall value might allow you to make a large down payment. It can dramatically lower your monthly payments.
If you trade in a vehicle that is worth $8,000 for a vehicle that only costs $5,000, you can drastically lower the amount you pay each month. You’ll also get a “new” car out of the deal.
You can see, by the way, that if this is the route you choose to take, you’ll want to act quickly. You’ll want to do it before missed payments hit your credit report.
Sell Your Car
If you can’t find a way to keep it, consider selling your vehicle to pay off the loan. Private sales often allow owners to realize some significant returns.
Selling your vehicle and paying off the remainder of your loan could still allow you to keep enough of the proceeds to fund the purchase of another vehicle. Remember, you’re having trouble making payments so be sure you get a sensible, reliable vehicle.
If you truly can’t make payments and can’t sell your vehicle, it may be in your best interest to turn over the keys to your car.
Work with your lender to voluntarily turn in your car. They are still legally able to pursue you for any balance left on the loan, less the value of the car.
Often, if there is a small balance, they’ll forgive it since your voluntary repossession saves them a lot of time and money trying to track down you and your vehicle to retrieve it.
File for Bankruptcy
If you’re having a more systemic problem with your finances, meaning that your car payments aren’t the only ones you can’t make, consider filing for bankruptcy.
Doing so will be a huge ding on your credit (you’ll probably a be a candidate for credit repair services in the future) and will affect your finances a great deal in the long term. However, many states have bankruptcy protections that allow you to keep your vehicle.
The overarching theme on what to do if you are unable to afford your car payment is to call your lender. They want to work with you to help you pay because they will make more money doing so.
They’ll definitely lose money if they have to pursue you to repossess the vehicle or have you enter bankruptcy. If you pursue one of the other options, be sure you do your research before moving forward.