I Can't Pay My Car Loan: What to Do When You Can Afford to Pay Your Loan Payments

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January 27, 2012

Many people find themselves in a spot where they can't pay their car loan. It's important to know that there are usually options out there. Obviously, you'd prefer to pay off your car under the terms of your loan agreement, but if you can't do that you need to be proactive and handle it in the way that is most advantageous for you.

Communicate with the Lender

Don't avoid your lender. Keeping the lines of communication open will be the best way to maintain the potential for a positive outcome. Too many people avoid the phone calls. Doing this will put the lender in charge of the situation, and they will often be as aggressive as possible in pursuing the debt. If you know you are going to be in trouble, it's better for you to contact them first. Preferably you should do this before you miss a payment or pay late, but if you have already passed that point it's not too late to open the communication.

Lenders will try to work with you when they can. They would rather work out some sort of payment arrangement that gets them their money than have to repossess the vehicle and sell it at auction. Be honest with them about your financial situation. Once they know the situation they can better work with you to figure out your options.

Selling the Car

If you owe less on your vehicle than its value, it might be a good idea to sell the car. That way you can repay the loan and hopefully have some money left over. This is a great option if the vehicle isn't your only transportation. Even if it is, though, you might get enough extra money to buy yourself an inexpensive car that will get you where you need to be.

Refinancing the Debt

The lender might be able to help you refinance the vehicle. This would usually extend the period of your loan out - meaning you'll be paying on it longer than you planned, but it can reduce your payments. If they can reduce the payments enough that you can keep the car, it's a win-win for everyone. Besides, when you are on better financial ground you can always make extra payments to get back near where you would have been under the original terms. They might have other forms of auto debt relief available that you can use. It's a safe bet that they are working with a lot of their customers to help them stay in their cars.

While these are two possible options, there are a number of other possibilities. Talk with your lender. That is the first step to figuring out a solution. Avoiding them will only make the matter worse. It's always better to tackle a problem head-on rather than hiding from it and hoping it will just disappear. In the case of a car loan that's out of your reach to pay, that is even more true than in a lot of other situations.

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