Most people finance vehicle purchases by getting a loan and paying their lender each month for the vehicle. If a vehicle owner falls behind on his car payments, the lender can repossess the vehicle. If you are having financial trouble, you may be able to sell the vehicle or voluntarily give it back to the lender. Most lenders will attempt to help you find a solution if you tell them you are having financial difficulties and cannot pay your car note.
Selling Your Vehicle
You can sell a vehicle that you owe money on only if you can get enough money for it to pay off the bank. For example, if you owe $6,000 on a car loan, you must sell the vehicle for more than $6,000 and pay off the bank before it will release its interest in the vehicle. If you cannot get enough money for your vehicle to pay off your loan, find a buyer who would be willing to make loan payments, and talk to your bank about transferring the loan to your buyer before you sell the vehicle.
Voluntary Repossession
If you cannot afford your loan payments, you may be able to return your vehicle to your lender as a voluntary repossession. Contact your lender and explain that you cannot afford your monthly payments and would like to return your vehicle. Your lender will tell you how to do this. Although you are voluntarily surrendering your vehicle, you will still receive a negative mark on your credit report for repossession. Repossession will affect your credit for at least seven years.
Refinancing
Refinancing your loan allows you to lower your monthly payments. When you refinance, your new lender pays off your old loan and then requires you to pay back the funds it used to do so. Refinancing often lowers your interest rates, which allows you to pay less per month as well as paying less in total for the vehicle. Some auto loan companies specialize in refinancing, and you can also contact your bank to inquire about refinancing options if you are having difficulty making payments.
Considerations
If you cannot pay off your loan through the sale of your vehicle, it may be complicated to transfer the loan or complete the sale. Voluntary repossession may also make it more difficult to purchase another vehicle in the future or affect your ability to make other large-scale purchases such as buying your home. Thus you should attempt to refinance your vehicle loan unless you truly cannot afford to make payments at all.
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