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4 minutes read. Published April 19, 2022
Authored by Dan Miller Written by Points and Miles Expert Contributor Dan Miller is a former contributing writer for Bankrate. Dan covered loans, home equity and managing debt in his writing. The article was edited by Rhys Subitch Edited by Auto loans editor Rhys has been editing and writing for Bankrate from late 2021. They are dedicated to helping readers gain confidence to manage their finances with concise, well-studied facts that break down complex topics into manageable bites. The Bankrate guarantee
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We are compensated for placement of sponsored products and, services, or by you clicking on specific links on our site. Therefore, this compensation may influence the manner, place and in what order items are listed in the event that they are not permitted by law for our mortgage or home equity products, as well as other home lending products. Other factors, like our own proprietary website rules and whether a product is offered in your area or at your self-selected credit score range may also influence the way and place products are listed on this site. Although we try to offer an array of offers, Bankrate does not include details about every financial or credit product or service. A crucial aspect of a successful budget is fitting every single expense within your income. As part of your ongoing review of your budget, you may find yourself in a situation where you feel like you can’t afford your car payments. If that’s the case, you have several alternatives to help you get your finances back. Each of these options has its particular pros and cons, and you should look them over carefully to see which option could be the most suitable for your needs. Contact the dealership and ask for an offer to trade in your vehicle. The first step that you can take is to call your dealer and ask if you are able to trade in your vehicle to get a cheaper version. This could be easier to determine if you originally bought your vehicle through a dealership and the loan is funded through it. That might make the dealership more receptive to working things out with you. However, even if this isn’t the case, it’s worthwhile contacting the dealer to find out the options open to you. Depending on the price difference between your new and current cars, and the term and conditions, you might be capable of saving a substantial quantity of dollars by changing to purchase a cheaper vehicle. Be aware that the current market circumstances could make selling your car a bit more difficult. The cost of used cars has climbed significantly over what they were years ago. Also, depending on the kind of car you are trading in and what type of car you’re planning to buy this could prove more difficult than you anticipated. Request loan modifications Another choice that you have if you can’t make the monthly car payment, is to ask for an . With a loan modification, you negotiate together with your lender to change the terms of the loan. It could mean decreasing the interest rate, delaying payments for a certain period, or altering your due date to align better with your schedule. A loan modification can also extend the duration of your current loan. This will usually lower your monthly payments, but you’ll pay more in interest over the life of the loan. You’ll want to proceed carefully and ensure that the numbers work for you before deciding to accept any changes. Refinance your car loan In the event that your lender does not want to alter your loan, you also have the option of refinancing . It is possible to shop around and apply for prequalification with a variety of lenders to find the best rates and terms. If you are a member of an institution like a local bank or credit union it is possible to obtain better rates because you have an existing relationship 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 have the ability to pay off your auto loan in a short time or have increased your credit score. Also, make sure to determine the fees associated with refinancing an auto loan. There are fees that include the early termination fee and transaction fee, state registration fees, the cost of auto insurance and late payment fee. Consider the following as a good method to refinance your vehicle: Decide if refinancing is the right financial move. Examine the current loan. Examine the credit rating. Determine the worth of your car. Find the most competitive refinancing rates. Calculate how much you’d save when refinancing. Get your paperwork in order. Sell privately and buy within your budget. If you can’t afford your car payments at the moment, another option to think about is to sell your vehicle privately, and later purchase a different car that is more compatible with your current budget. There are more steps involved with this, but it’s still definitely doable. It is good for selling a used car, with prices significantly higher than previous years, so you may be able to command an excellent price. Of course, the other aspect of a booming used car market is that it could be more challenging to find a replacement car that fits your budget. It is important to research the market and understand the price to buy a new car. That will provide you with an idea of how much you’ll save by switching cars , and whether it’ll be worth the cost to you. Ask friends and family for assistance. A last resort could be to contact relatives and friends for assistance. This may or may not be a great option for you based on your relationship with 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 the people closest to you might be a good avenue to consider. Remember, too, that assistance from family and friends doesn’t have to have to be financial. Although it would be wonderful to have a wealthy uncle who could take care of your loan immediately, most people aren’t in that type of scenario. But in addition to possible financial assistance the family members and friends of yours may also be trying to sell a used car or know someone who has. This kind of connection could help you save money. Next steps When you’re in a situation where you can’t afford your car payment, acknowledging and taking a look at your financial situation is the first step. In the event of ignoring the issue, or even more serious, failing to pay to your auto loan could cause major issues with your financial health overall. If you’ve discovered the issue, it’s time to explore your options. Contact your lender first to determine if they would be willing to alter the terms of your loan. They don’t want to modify existing loans however, they don’t like repossessing cars. Be clear about the need for a modification for you to keep making payments. Based on your circumstances and your score on credit, you might be able to refinance a loan and possibly save money. Make sure you research the charges associated with refinancing and read the conditions of your loan contract before making any decision. Frequently asked questions What do I do if I’m not able to pay for my car? If you’re not able to pay for your car loan, now is the time to take action. Review the following options: Reach for your lender to consider deferring payments, look into the possibility of obtaining an alternative loan, trade in your car or sell it or surrender your car voluntarily. What are the charges that are associated with refinancing an auto loan? Costs for refinancing an automobile loan may include an early termination fee and transaction costs and state registration fees. They also include auto insurance costs late payment fees, and an up front cash payment. Can you refinance a car loan even if you have a low credit score? Yes, you could be qualified for a refinance loan even if you have a bad credit score. Find out more
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Authored by Points and Miles Expert Contributor Dan Miller is a former contributor to Bankrate. Dan was a writer for Bankrate who covered loans as well as home equity and managing debt in his writing. Edited by Rhys Subitch Edited by Auto loans editor Rhys has been editing and writing for Bankrate since late 2021. They are committed to helping readers feel confident to control their finances by providing concise, well-researched and well-documented details that cut complicated topics into digestible pieces.
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