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4 min read . Published April 19, 2022
Dan Miller Written 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 writing. The article was edited by Rhys Subitch Edited by Auto loans editor Rhys has been editing and writing for Bankrate since late 2021. They are dedicated to helping readers gain confidence to take control of their finances with concise, well-studied facts that break down complicated subjects into digestible pieces. The Bankrate guarantee
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This compensation could affect the way, location and in what order items are listed in the event that they are not permitted by law for our mortgage, home equity and other home loan products. Other factors, such as our own rules for our website and whether or not a product is offered in your area or at your self-selected credit score range could also affect how and where products appear on this website. Although we try to offer the most diverse selection of products, Bankrate does not include details about every financial or credit product or service. One of the most important aspects of creating an effective budget is incorporating all of your monthly expenses within your income. As part of your ongoing review of your budget, you could encounter a situation in which you feel you’re not able to afford your car payments. If that’s the case you’ve got a few alternatives to help you get your finances back. Each of these options has its own set of pros and cons, so you should look them over carefully to determine which one could be the most suitable for your needs. Contact the dealership to request trade. The first step that you can do is to reach out to your dealer to see if they can swap your car for a more affordable version. This might be easier to figure out if you originally bought the car from a dealer and your loan is financed by it. That might make the dealership more receptive to discussing the details with you. But even if that isn’t the case it’s worth calling the dealer to find out what options might be available to you. Based on the cost difference between the two vehicles, as well as the terms and , you may be in a position to save a substantial sum of cash by switching choosing purchase a cheaper car. Be aware that the current market circumstances could make selling your car a bit more difficult. The prices of used cars have climbed significantly over the last few years ago. Therefore, based on the kind of car you’re selling and the kind of car you’re looking to buy, it may be more challenging than you expected. Request loan modification Another option that you can consider if you are unable to pay for your car is to ask for the loan modification . With the option of a loan change, you collaborate together with your lender to change the conditions of your loan. This could include the reduction of the interest rate, delaying payments for a period or altering your due date so that it is better with your plans. A loan modification could also extend the time frame of your existing loan. It will typically lower your monthly payments, but you’ll be paying more interest over the course of the loan. You’ll want to proceed carefully and make sure that the numbers are in your favor you before deciding to accept any modification. Refinance your auto loan When your lender is not willing to alter the terms of your loan You also can choose to . You can search around and apply for prequalification with a variety of lenders to get the best rate and terms. If you have accounts with a local bank or credit union You may be able to get better rates because you already have a history with them. Before refinancing your auto loan, find out whether you’re eligible. Even the case that you have a bad credit rating, you might be eligible to if you are able to pay off your auto loan quickly or you have made improvements to you credit scores. Be sure to check if there are any fees that are associated with refinancing your auto loan. There are fees that include fees for early termination, transaction fees, state registration fees, the cost of auto insurance and late payment charges. Think about the following as a good process to refinance your car Choose if refinancing is the best financial decision. Review your existing loan. Check your score on credit. Estimate the value of your car. Compare refinancing rates. Find out how much you could save when refinancing. Get your paperwork in order. Sell privately and purchase within your budget. If can’t afford your car payments in the present, a different option to think about is to sell your car privately and then buy a new car which is more in line with your current budget. There are additional steps to take with this, but it’s nevertheless feasible. This market has been particularly ideal for selling an older vehicle, with prices substantially higher than in previous years, so you may get the best price. However, the negative downside to a highly-priced marketplace for used cars is that it may be more challenging to find an appropriate replacement vehicle that is within your budget. Be sure to study the market and understand the price to buy a new vehicle. This will give you an idea of how much you’ll save by changing cars and whether it will be worth it to you. Request help from family and friends. assistance. The last option could be to ask your family and friends for help. It could or might not be the right choice for you depending on your relationship with your family and friends, as well as their own financial situations. But if you’re in a dire situation where you can’t afford the car loan, talking with those that are closest to you may be a viable option to explore. Keep in mind as well that assistance from friends and family doesn’t always have to be financial. While it would be great having a wealthy uncle who would pay off your loan immediately, most of us are not in that kind of situation. In addition to financial help the family members and friends of yours may also be trying to sell their used vehicle or know someone that has. Those kinds of connections might aid you in saving money. Next steps When you’re in a position that you are unable to pay your car payments, recognizing and taking stock of your financial situation is the most important step. If you ignore the situation, or even more serious, failing to pay on your car loan could cause major issues in your financial standing. After you identify the problem you should look into your options. Call your lender first to determine whether they’re willing to amend your loan. Lenders don’t like modifying existing loans, but they also do not like repossessing vehicles. You must convince them of why a modification is necessary to ensure you continue to make payments. Based on your circumstances and credit score, you could be able to refinance your loan and possibly save cash. Be sure to study the charges associated with refinancing and read the terms of the loan agreement before making any decision. Frequently asked questions What do I do if I can’t pay for my car? If you are unable to make payments on your car loan it’s the best time to take action. Explore your options below: Reach for your lender to see if you can defer payments, think about getting an alternative loan, swap your car in for a new one, trade it in or give up your car voluntarily. What are the costs that are associated with refinancing an auto loan? Costs for refinancing an existing auto loan may include an early termination charge as well as transaction costs, state registration fees, insurance for autos, late payment fees and an upfront cash payment. Are there ways to refinance an auto loan even if you have a low credit score? Yes, you may be qualified to refinance a loan even if you have a bad 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 covered loans as well as home equity as well as debt-management in his writing. 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 the confidence to take control of their finances through providing clear, well-researched details that cut complex topics into manageable bites.
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