Getting Help with Your Car Loan Payments

The moment you get a car can be very exciting, especially if it is your first car or dream car. Owning a car can mean many things to different people - it can equal freedom, assist with their livelihood or simply get them from point A to B comfortably. Cars are generally the second largest purchase a person will make besides their home and many people take pride in their vehicle.

However, if you’re dealing with financial difficulties and falling back on your payments, the thought of losing your car can become stressful. In many cases, most people cannot do without their car and losing it isn’t an option.

Fortunately, there are numerous options available to help you keep your vehicle regardless of how bad your situation may be.

What Happens If You Can’t Keep Up With Your Payments
Usually, when the lender sees that you missed a payment, they will call you or send mail notifications in order to try and collect. If a borrower continues to miss payments and ignore the lender, the car will most likely be repossessed.

Repossession from missed payments will also result in bad credit. This will make it more difficult for receiving future credit.

Understanding repossession:

- Repossession time generally depends on the state you live in. In certain areas, repossession can be actioned after one missed a payment, while other locations may require multiple missed payments and notification letters.
- Repossessed vehicle generally end up being sold in auction. It’s not uncommon for the vehicles to be auctioned for less of their market value. If the car sells less than what you were supposed to pay on your loan, you may be required to pay the differences.
- Some lenders may just ‘forgive’ the difference, although you might end up increasing your tax liability as the IRS sees those kinds of debt forgiveness as a income source.

How to Keep Your Car
Options for Temporary Payment Struggles

If you find yourself with temporary financial trouble, it’s good to be proactive with your different creditors…including car finance. Most creditors will work with you if you contact them and disclose and prove your situation.

  • Contact your lender for negotiations

Contrary to the popular belief that every lender is out there to get you, it is actually in their best interest to ensure that you remain a customer for their company – even though you might be going through a difficult time. This is why you might be surprised at how willing they are to negotiate if it means keeping them from losing you. Here are some options you could tackle when negotiating with your lender:

  • Ask if you can get a 30-day (or longer) deferral.
  • Check if you could pay less for a month in exchange for prolonging your loan.
  • Try lowering your interest rate.

Remember that while these modifications can be helpful at the moment, you could end up paying more in the long run. When you miss a loan payment or choose to extend your loan, you could find yourself paying more money in interest during your loan, regardless if the interest rate is lowered or not. However, if you are in a tight spot, this might be the least of your problems. Once you’re back on track, you can add extra money to your payments so that you can avoid paying too much interest.

* Consider professional help and setting up a Debt Management Plan, speak to your local credit counselor for help.

  • Get a bridging loan

If you are financial issues are temporarily and you are sure to have income to make up for your late payments and continue to make future payments - a small loan to see you through may be an option. Be sure to look for low interest affordable loans to reduce costs and debt.

  • Non-profit or charity help

In certain instances there are non-profits or charities who may assist with one off payments or provide grants (see self-sufficiency grant). Check with your local charities or churches for assistance.

Options for Permanent Payment Problems

If your financial issues may be more permanent or long-term, there are a few other things to assist with keeping your car or avoiding repossession. Below are some of the more popular and common options available.

  • Consider refinancing your vehicle

If your credit score is somewhere between “good” and “excellent,” then you have a good chance to refinance your car to a lower interest rate. This can help in two ways; the first is a lower monthly repayment based on the lower rate. The second is an even lower monthly repayment if you compound the lower rate with longer terms.

This may increase your overall loan costs but will allow you to keep your car whilst making lower payments that you can afford. Should your financial situation change for the better, you may be able to increase the size of your monthly repayments, which will reduce the overall interest you will pay back.

  • Transfer your payments to someone else

If you feel like the payment is too much for you and you can get by without a car, consider ‘shifting’ the payment to someone else. Check with your lender to see if they will allow a third party to ‘assume’ your payments. If they approve, the next step is to find someone who might be interested in your car and move forward with the transfer. Make sure that your name is no longer on the loan document so that you can avoid any future liabilities.

  • Trade your vehicle of choice with a cheaper one

If you feel that your car is more than you can handle, you can trade it for something that is a tad bit more affordable. Shop around for trades – while making sure that your dealers have the car you wish to acquire in their possession. Also, you need to keep in mind that the value of the car you want may be lower than the balance of your first loan. With any downgrading, make sure that it makes financial sense for you.

  • Sell your vehicle

Another way to get out of a troublesome loan is to sell the car altogether. Hopefully the money you receive will be enough to pay off the vehicle and free you from the debt.

Repossession Comes With Disadvantages for All Parties
The good news for those late or behind on payments is that repossession has come down from its peak back in 2009. By 2012, repossessions had reduced by 30%, as lenders looked for more ways to work with borrowers before moving to repossession. With car seizure:

  • No one actually wins as you lose the vehicle and the dealer/lender loses money.
  • Lenders will generally try to help you as long as you reach out and work with them.

If you’re struggling with your loan, remember that there are options available. Speaking with a credit counselor or community action agency can assist if you need professional advice from those who deal with financial issues on a regular basis.

They may be able to help you reduce costs in other areas of your budget, creating freed up cash to make your payments.

If you are in a situation where you must have a car and are sure to lose your current car. There are charities that do provide free cars.