Can't Afford Your Car Payment? You Still Have Options

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Meghan Carbary has been writing professionally for nearly 20 years. A published journalist in three states, Meghan honed her skills as a feature writer and sports editor. She has now expanded her skill-set into the automotive industry as a content writer for Auto Credit Express, where she contributes to several automotive and auto finance blogs.


, - September 5, 2018

Sometimes in life unexpected things happen, and these changes can affect our finances in some situations. If this happens, you may find yourself struggling to pay monthly bills that previously weren’t a problem – like an auto loan.

Options Based on Your Situation

When you financial situation changes, it’s up to you to keep your lenders informed of your situation, preferably before you start missing payments. In terms of an auto loan, your options vary depending on the lender and what they’re willing to do to work with you. Two of the more common options are:

  1. Deferring one or more monthly payments If the situation is only temporary, your lender may be willing to defer one or more monthly payments, as long as your loan is in good standing. Deferring a payment means moving it to the end of your loan. This option isn’t available for everyone, and depends upon your lender.
  2. Refinancing your auto loan If you’re not sure how long it’ll take to correct your situation, it might be in your best interest to lower your monthly payment by refinancing your vehicle for a longer term. The availability of this option depends on your credit, your payment history, and how long you’ve had your loan.

If you can’t defer a payment or refinance, but still need to lower your car payments, another option you can look into is trading in your vehicle for something with a lower monthly payment.

Can I Give My Car Back to the Bank?

Trading in your current car for something more affordable works best if there’s equity in your vehicle – meaning you owe less on the loan than the car is worth. In this situation, you can trade in the vehicle, pay off the loan, and use any remaining equity as a down payment on a more affordable car.

If there’s no equity – or worse, negative equity – in the vehicle, it means you won’t see a profit from the sale of your car. In fact, if you’re upside down, you’re going to have to pay the difference between the vehicle’s value and the loan balance out of pocket.

If you can’t pay the difference, some lenders allow you to roll the negative balance into another loan. This, however, can be a risky move because you still owe a balance from your last loan. It then is added to the new loan, making the amount you’re financing higher, resulting in a higher monthly payment and costing you more in interest charges over your loan term.

Last Ditch Options

If there’s not enough equity in your car to make it worth trading in, you may need to give up the vehicle. The only way to do this is through a voluntary repossession. This means that instead of waiting for the lender to send the “repo man”, you return the car and terminate your loan. Voluntarily doing this helps you avoid the fees associated with the repo process, but you’ll still have to pay the difference between the loan balance and what the vehicle sells for at auction plus any fees, and the negative mark from the repossession lowers your credit score.

If your vehicle is in good condition, another option is to sell it privately. Sometimes, selling a car yourself allows you to make a little bit more than you would selling to a dealership, but it depends on your situation, the condition of your vehicle, and many other factors. If you’re able to get enough in a private sale, you could pay off your lien and use what’s left as a down payment or to purchase a cheap car for cash.

Finally, if all else fails, you can visit a local buy here pay here (BHPH) dealership. These dealers are the lenders – known as in-house financing – and they typically base what you qualify for on your income. Be aware, however, that a loan from a BHPH dealer isn’t likely to improve your credit, and the vehicles are usually older models with higher mileage. You’re also going to have a high interest rate, especially if your credit is suffering, so you’ll want to look at your other options first.

Start by Exploring CarsDirect

No matter what you’re going through, you have options available. Just make sure you research all of them before you jump right into another loan, and make sure the route you choose to go is realistic for your current situation. When you’re ready to find a way to make that next car happen, we can point you in the right direction, even if your credit has been damaged by a voluntary surrender or repossession.

At CarsDirect, we work with a nationwide network of special finance dealers that have the lending resources to help people in many different credit situations. Start here by filling out our easy and free auto loan request form today! We’ll get to work matching you with a local dealer right now.

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Meghan Carbary has been writing professionally for nearly 20 years. A published journalist in three states, Meghan honed her skills as a feature writer and sports editor. She has now expanded her skill-set into the automotive industry as a content writer for Auto Credit Express, where she contributes to several automotive and auto finance blogs.


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