5 Ways to Get Through the Difficulty of Being Unable to Afford Your Vehicle Payment

It can be tough deciding what to do about a car you’re having trouble affording and making your payments. Ultimately, you’ll want to make the decision that gets you up and running again as quickly and efficiently as possible. Here are some things you can do to help you choose the best solution for you.

Expenses and bills can be a hassle to deal with every month. It’s possible you were laid off from work and you’re still seeking new employment. On top of that, paying your car loan is hard enough. The question is, what should you do?

Good thing you’re at the right place. Here are a couple of solutions to consider when you can’t afford car payments.

1. Talk to Your Lender

This is the first thing you must consider doing. Get on the phone as soon as possible to discuss your financial situation with your lender. In many cases, lenders are willing to work with borrowers to reduce the amount owed. Additionally, find out if they have a relief program that you may qualify for. Most financial institutions will permit you to pause payments for up to a month without penalizing you, especially if you always pay on time. You may have more options available to you if you contact your lender sooner rather than later.

Your lenders may be willing to help if you ask them these two terms:

• Request that a due date be changed. Were you concerned that your payday got postponed a few days after the payment due date? Negotiate with your lender and ask if it is possible to change the due date for that month. You’re better off asking ahead of time than not informing them at all.

• Make changes to your payment schedule. You can ask your lender if they can adjust your payment plan based on your financial situation if you’re having trouble making your monthly payments. By doing so, you may be able to pay off your monthly fees more easily. You have nothing to lose by asking.

It should be noted that these requests may incur fees and result in interest increases. Ask your lenders beforehand if there are implications that come with these particular requests to eliminate confusion in the future.

It is also a good idea to write down the representative’s name, their ID number, and any case numbers that are associated with your request.

2. Ask for a Deferment

Payment extensions may be an option for you if you are experiencing hardship that will probably last longer than what a change in payment due date can help resolve but might not necessitate a payment plan or if you are current and proactively searching for hardship assistance. Various lenders offer different payment extensions, and every lender has different criteria for evaluating your account. You may be able to defer payments a limited number of times. If you are behind on your payments, you may not be considered for an extension. You should discuss the requirements with your lender.

If you experience financial hardship or a natural disaster, an extension of payment allows you to postpone a certain number of monthly payments-usually one or two until a later date. Some lenders will allow you to temporarily delay your entire monthly payments, and others will only allow you to temporarily delay the principal portion of your payments. You will be required to pay both principal and interest, however.

A payment extension may ease a short-term hardship, but you’ll still accrue interest during that time. In most cases, the loan contract you have with your lender is a simple interest loan, meaning that you accrue interest daily based on your payoff balance. Every time you pay your loan, your lender calculates your interest due. In the event of an extension, you will be charged an additional interest based on how long the extension lasts. The interest accrued if you extend your loan earlier in your tenure when your payoff balance is higher would be greater than if you extend it later. Getting a payment extension could result in significant interest increases and added payments at the end of your loan term.

3. Refinance Your Car Loan

High-interest rates are making it difficult for you to repay your car loans. Therefore, if you want lower interest rates, your credit rating must be better than the one you had when you applied for a car loan.

This involves getting a new loan from a different lender after replacing your existing one. Following the signature of the paperwork, your new lender will pay off the existing loan and take over the title of your car until the loan is completely repaid.

The interest rate or monthly payment of your mortgage can be reduced by refinancing. You should prioritize payments on your bills if you’re having trouble paying them-and also look for refinancing options that will allow you to extend your loan’s term.

In the case of low credit scores or a vehicle owed more than it is worth, refinancing may be difficult. Your lender may also charge an early payment penalty if you pay off your loan early. However, if having your car repossessed is your only option, refinancing may make sense.

Make sure that the company to whom you are applying for a refinance is a trustworthy organization. Several reports have surfaced about scammers who promise to lower your monthly bill in exchange for a fee.

4. Trading in Your Car

Trading in your car for a cheaper and more practical one might be the solution to your payment struggles. Reflect on the value of the car. Think about if you need that kind of luxury vehicle or you’re good to go with a more common brand. You might also want to consider transit if you’re in a transit-friendly city. It could not only save you on your car payments, but you’d also be able to cut back on insurance, maintenance, and all those other car expenses to keep it running.

Consider getting quotes from several dealerships if you decide to trade in your car. Once you have negotiated a fair price with your favorite dealership, you can choose an alternative vehicle. There may even be a chance for you to trade up to a newer car if you don’t owe more than it’s worth because of your current loan.

While it is possible to sell your vehicle to pay off your current loan, it can be a risky move. We’d recommend speaking to the current title-holder prior to making an effort to sell the vehicle without having access to the title. The buyer takes a considerable risk in this scenario, so ensuring that the process is mutually understood is paramount to making a successful transaction.

5. Car Repossession

Wait. Is it possible to return your vehicle to the car lender? Well, yes! This is what you call “voluntary repossession” or “voluntary surrender”. This option, however, is your last resort if you really can’t do the other options stated above. This may also leave you with damaged credit scores, but it’s better than involuntary repossession where you can’t pay off your car loan anymore and your lender decides to take back the vehicle from you.

Keep in mind that the lender might still try to collect money from you if you owe more than they can get for the vehicle at auction.

Tell your lender what you intend to do if you do decide to turn in your keys. You’ll be guided by your lender throughout the process and advised when and where to hand over your car.

Conclusion

Each of the above strategies has merit based on your specific situation.

Keep your eye on that pile of bills no matter what you do. The smallest car payment missed could cost you fees, damage your credit score, and result in your car being repossessed. The sooner you act, the better your chances of success will be.