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4 min read Published April 19 2022.
Authored by Dan Miller Written by Points and Miles Expert Contributor Dan Miller is a former contributor to Bankrate. Dan wrote about loans as well as home equity and debt management in his work. Edited by Rhys Subitch Edited by Auto loans editor Rhys has been writing and editing for Bankrate since late 2021. They are passionate about helping readers gain confidence to take control of their finances by providing concise, well-studied facts that break down complex topics into manageable bites. The Bankrate guarantee
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We are compensated in exchange for placement of sponsored products andservices or through you clicking certain links posted on our website. This compensation could influence the manner, place and in what order products appear within listing categories, except where prohibited by law. We also offer mortgage or home equity products, as well as other home lending products. Other elements, such as our own proprietary website rules and whether or not a product is available within your area or at your self-selected credit score range could also affect the way and place products are listed on this site. While we strive to provide an array of offers, Bankrate does not include information about each financial or credit item or service. An important part of an effective budget is incorporating every single expense within your income. As part of your ongoing review of your budget, you could encounter a situation that you think you can’t afford the car payment. If that’s the case there are a variety of options to find relief. Each option comes with its own pros and cons, and it is important to study them carefully to see which option is the best for you. Contact the dealership to request an offer to trade in your vehicle. One of the first steps that you can take is to reach out to your dealer to see if they can trade in your vehicle for a more affordable version. This could be easier to work out if you originally bought the car from a dealer and the loan is financed through it. This could make the dealer more flexible in discussing the details with you. However, even if this isn’t the case it’s worthwhile contacting the dealership to inquire about the options available to you. Depending on the price difference between the two cars, and the term and , you may be able to save a significant amount of money by to purchase a cheaper vehicle. Be aware that the current market situation could make selling your vehicle somewhat more difficult. Prices of used cars have increased significantly from where they were a few years ago. Also, depending on the type of vehicle you’re selling and the kind of car you’re looking to get instead it could be more challenging than you expected. Request loan modification Another option you have if you can’t make the monthly car payment, is to apply for the loan modification . Through the option of a loan change, you collaborate together with your lender to alter the conditions of the loan. This could include the reduction of the interest rate, delaying payments for a certain period, or altering your due date so that it is better with your schedule. A loan modification may also prolong the duration of your current loan. This usually reduces the monthly payment, however you will pay more interest over the duration of the loan. You should be careful and ensure that the numbers work for you before deciding to accept any modification. Refinance your car loan When your lender will not alter your loan You also have the option of refinancing . You can shop for a prequalification with several lenders to get the best rate and terms. If you have an account with a local credit union or bank, you might be able to find better rates there since you have a long-standing relationship with them. Before you refinance your auto loan check whether you’re eligible. Even even if you have a low credit rating, you could be eligible if you have the ability to pay off your car loan quickly or have made improvements to the credit rating of your. Also, make sure to determine the fees associated with refinancing an auto loan. There are fees that include fees for early termination, transaction fees and state registration fees. the cost of auto insurance and late payment charges. Think about the following as a suitable method to refinance your vehicle: Decide if refinancing is the right financial move. Review the current loan. Examine the credit rating. Determine the worth of your car. Shop around for the best refinancing rates. Calculate how much you’d save when refinancing. Get your paperwork in order. Sell privately and purchase within your budget. If can’t afford your car payments right now, another possibility to think about is selling your car privately and purchase a different car which is more within your current budget. There are a few more steps in , but it is nevertheless feasible. The current market is good for selling a used vehicle, with prices substantially higher than previous years and you could be able to get a great price. Of course, the other aspect of a booming second-hand car marketplace is that it may be more challenging to find an appropriate replacement vehicle that is within your budget. Be sure to study the market thoroughly and know what it will cost to buy your replacement vehicle. This will provide you with an idea of the amount you’ll save by switching cars , and whether it’ll be worth it for you. Ask friends and family for assistance. A last resort could be to contact friends and family for assistance. This may or may not be the right choice for you based on your relationship with friends and family, and their financial situation. If you’re in a circumstance where you’re unable to pay the cost of your car, speaking to those who are close to you may be a viable option to think about. Be aware that assistance from family and friends doesn’t have to have to be financial. Although it would be wonderful having a wealthy uncle who would take care of your loan quickly, the majority of us are not in that situation. In addition to financial help, your friends and family might also be looking to sell their used vehicle or know someone that has. These connections could help you save money. Next steps When you’re in a position where you can’t afford your car payment, acknowledging and assessing your financial position is the first step. In the event of ignoring the issue, or more importantly, not paying on your car loan could cause major issues in your financial standing. Once you’ve identified the issue then you need to look into your options. Call your lender first, to see whether they’re willing to amend your loan. The lenders don’t like changing existing loans However, they don’t like repossessing cars. You must convince them of why a modification is necessary to continue making payments. Depending on your situation and credit score, you could be able to refinance a loan and possibly save money. Be sure to research the charges that are associated with refinancing, and review the conditions of your loan agreement before taking any action. Most frequently asked questions What should I do if I can’t afford my car payment? If you are unable to pay for your car loan and you are in a position to pay it, now is the best time to take action. Explore your options below: reach out to your lender, determine if you are able to defer payments, consider taking out a new loan or sell your car, or let it go or sell your car voluntarily. What are the costs associated with refinancing an auto loan? Fees associated with refinancing an automobile loan might include an early termination charge as well as transaction fees and state registration fees. They also include auto insurance cost late payment charges and an up front cash payment. Can you refinance a car loan even if you have a low credit score? You may be eligible for a refinance loan even if you have a low credit score. Find out more
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The article was written by Points and Miles Expert Contributor Dan Miller is a former contributing writer for Bankrate. Dan wrote about loans home equity, loans and debt management in his work. Edited by Rhys Subitch Edited by Auto loans editor Rhys has been editing and writing for Bankrate since the end of 2021. They are dedicated to helping their readers gain the confidence to control their finances through providing concise, well-researched and well-documented details that cut complex subjects into bite-sized pieces.
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