Even when money is tight, you likely prioritize certain bills over others — your car loan bill among them. After all, you need your car to get to work and transport the kids to and from school and activities. For some Americans, though, paying car loans is becoming too much of a financial burden. According to a recent report from the Federal Reserve Bank of New York, over 7 million Americans are more than 90 days past due on their auto loan bills. When you can’t pay your auto loan bill, your credit score will drop significantly. If you find yourself among that group of financially squeezed consumers, here’s help for car loan delinquency.
Call Your Lender
The best place to start is to call your lender and explain the situation — ideally before you miss a payment. Sometimes lenders will work with customers who have a proven track record but may have run into some financial difficulties. The lender might offer you a forbearance option, which allows you sometime before you need to make payments again. Or they could lower your payment or let you skip a payment or two. Come up with a number you can comfortably pay each month if your lender asks. Remember that lenders would rather work with borrowers on a payment plan than resort to the last-ditch repossession move. This option is best used if your money troubles are temporary — such as if you’re between jobs — and you anticipate paying your car payment in full within the next couple of months.
Help your car loan delinquency issues by contacting an outside lender to find out if you can refinance your existing loan. Refinancing may lower your interest rate or extended loan term, either of which will result in a lower monthly payment. You’ll likely have to shop around for the best rates — and keep in mind that your credit might take a hit if you’re submitting multiple credit inquiries. Best bet: Check with your local bank or credit union, which tend to offer the cheapest rates for refinancing auto loans. If you go with this option, remember that you should still be in a position where you can pay off the refinanced loan. Otherwise, refinancing might just exacerbate your money woes.
Trade-in or Sell
If you have been struggling for several months to make the car payments and see no end in sight, unloading the vehicle might be the smartest move. You might choose to trade in the car. However, you’ll likely receive less in a trade-in offer than you would simply by selling on your own. Try to sell the car for enough to pay off your existing loan. Otherwise, you’ll be responsible for coming up with the difference — which you can either pay off through your own savings, a personal loan, or a combination of both.
Consider a Cheaper Car
If your car payment is simply too much for you to afford, think about downsizing to a cheaper car. A used car can be a decent option that will snag you a lower payment and help with your immediate issues. With some diligent online searching, you should be able to find a reliable vehicle for a few thousand dollars. If you’re worried about spending money on a less expensive car that may not last long, remember that this is a temporary solution — designed to help you dig yourself out of debt and build up some savings so you can buy a more dependable car in the future.
Negotiate a Settlement With the Lender
It’s worth asking if you can work out a settlement with the lender. For example, you might propose to pay less than the full amount due on the loan. You’ll probably need to show proof that you’re unable to pay the entire outstanding balance. Negotiating a settlement will result in a hit to your credit score, but the damage will be much less than if you’d just stopped paying the loan.
Turn Things Around
If you’re struggling to make your car payments, chances are your credit might be feeling the heat. At Ovation Credit, we can help turn things around and offer help for car loan delinquency. Our credit repair specialists are standing by with solutions. Get ahead today and contact us for a free consultation.