There’s a strong likelihood you’ve had a huge (and non-positive) adjustment in your life if you’ve come across this article. Potentially a tragic event occurred, or maybe your personal finances just dipped. Whatever the cause, you are scared of defaulting on your car payments, and you are here because it’s seeming quite impossible to meet up with the payment schedule. Rather than beating around the bush, let’s dive right into the things you can start doing to help you with your car payments. The best news, there are some options to consider:
Refinance or Sell: With Equity
The first thing to consider is if you have equity in the vehicle. Assess the car’s value and compare it with the amount you owe. If the car’s value is higher than the amount owed, then you’re in equity. If the car’s value is lower than the loan owed, then you’re in the negative. In the automobile industry, it’s called “Upside down”.
If you wish to do away with the vehicle, you may consider selling the car outright, perhaps even to a car dealership. This is an easy way of getting free from the shackles of car loans you can no longer handle. At times, you may even have some balance in your pocket to help you go for a car with lower car payments.
You may want to sell to a private party but it can be quite tricky since the car’s title is not available, therefore it’s safe to sell to a dealer.
In situations where you want to keep the vehicle and you are in an equity situation, you can consider refinancing your car loan. Though you should not expect to get a lower interest rate, you will get longer loan term so you can pay back your car loan.
Let Someone Take on Your Loan
If your loan is a good lease with a low-interest rate, someone, particularly a buyer, may be willing to assume your loan. First, you need to speak with your car lender to know if your car loan can be taken on by another person. If it is, then the person who’s supposed to take over your car loan must meet certain criteria, such as meeting income qualification and credit requirements.
In addition, rules for assumption of loans vary by lender. And if the person taking on your loan fails to pay on time, you may be required to get the car back.
Sites like LeaseTrader and Swaplease can offer you a platform to lease your car out. This can only be done if the terms of the car loan allow it. This will unhook you from future car loan payments but puts you a bit elsewhere. Others have tried to start this process using social media as well, but we do not advise it for safety reasons.
Poor Solution – Turning the Keys In
If the lender sends a tow truck to move your car, that’s termed a “repossession”. But if you willingly return the car keys to the lender, it’s termed “voluntarily surrender” or “voluntarily repossession”.
If you voluntarily surrender the car keys, the cost of sending a tow truck and car storage fees will slide past you. But either way – whether repossession or voluntary – lenders view it as one thing: failure to keep your side of the loan terms. They will appear differently on your credit report; nevertheless, both actions will still hinder your credit.
However, some lenders may still demand you pay for the car loan “deficiency” – the difference between the car’s auction value and the amount you owe. If you are considering this option, you may need to have a talk with the lender beforehand to help you both come to an understanding.
File for Bankruptcy
In some rare situations, filing for bankruptcy can save your vehicle from being repossessed. At times, it helps wipe out debt of deficiency you owe on a vehicle that’s repossessed or voluntarily returned already. If considering this option, it’s still best to talk with a bankruptcy advocate.
The best way to head off trouble on your car loan are the things you do before diving into your car loan deal. Handing back the keys, refinancing or extending your loan terms are not the best course of action or strategy to take.
Avoiding the whole “I can’t pay” situation is your only path to success. And if that doesn’t work, have a back-up plan. Try to keep emergency funds aside, something that can last up to six months can help you get out of situations like this in times of hardships.
Another simple tip is only buying the car that fits your financial situation. It may not be the car of your dreams, but it should sure save you the stress of car payments. Stay within your means and be happy you did.
If you’re still stuck in the financial mud of car loan payment after doing all this, sometimes a little luck and a call to DriveNation may be all you need.