What to Do If You Can No Longer Afford Your Car Payments

Many things can cause someone to become delinquent on their car payments, including the loss of a job or large, unexpected bills. There are a few things you can do if you find yourself no longer able to make your car payments.

Inform the Lender

When you first realize that you cannot make your scheduled car payment, call your lender and explain your financial situation. The repossession process can be long and difficult, so your lender might be willing to work with you in the hope that your financial situation will turn around.

Deferment

If you have a good payment history, ask your lender for a deferment. Some lenders are willing to defer one monthly payment for up to 30 days or two payments if they're added to the end of the loans term.

Refinance

If you still have decent credit, try to refinance your car loan. This won't necessarily reduce the amount of your debt, but it will restructure it so you can have lower monthly payments. You may even qualify for a lower interest rate. Check with your current lender about refinancing, but also consider going to other lenders to find the best deal.

Sell the Car

If you can no longer make the payments on the vehicle and there is no other financial solution, try to sell the car. However, because you cannot transfer the title to the vehicle until you pay it off, the buyer will need to pay the amount owed on the car or you must both go to the lending institution and combine your funds to pay off the car.

Assume Payments

Ask your lender if they will allow another person to assume your car payments. This is similar to selling the car, but the buyer simply starts making payments rather than paying the entire cost of the car upfront. The buyer will need to qualify through their income and credit history to be approved to assume the payments on your vehicle.

Repossession

If you can no longer afford your car payments and cannot sell your car or refinance your loan, the car may be repossessed. After a few months of missed payments, the lender will send a repossession company to take it back. The lender will sell the vehicle, and you will be responsible for any difference between the amount owed on the vehicle and the amount for which it sold. However, you should avoid allowing your car to be involuntarily repossessed, because it will cause serious damage to your credit.

Bankruptcy

In some cases, filing for bankruptcy may stop any repossession efforts. However, you should consult a qualified bankruptcy attorney before choosing this option.