Everyone runs into financial problems now and again. Whether it’s from injury, job loss or other unfortunate money circumstances, it’s possible that you find yourself having trouble paying your loan and bills. Skipping payments on your auto loan, however, is never a good idea. This can result in bad credit and even losing your car to repossession. Here are some tips for what to do when the money monster bites and you find yourself behind.
Reach out to your lender and ask if they have any options for temporary financial hardship. Some lenders will permit you to adjust your loan so that you make lower payments for a while. They may even allow you to take forbearance for a month or two, making up the difference down the line. However, if you think you will have issues, reach out to the lender before you miss a payment.
For many people, refinancing your vehicle can be a smart move to lower your interest rate and thus lower your monthly payments if you’re having trouble paying your loans. Be warned, however, that refinancing does not always simply mean lowering your rate. It often means replacing your current loan with a new one. This new loan can be longer term than your old one, placing you upside down by the time you pay off your vehicle.
Turn Over Your Loan
In some cases, especially if your loan has a good interest rate, you may be able to find a buyer who is willing to simply take over your payments. This requires working with your lender. Firstly, you will want to be sure that your loan is “assumable,” meaning it qualifies for this arrangement, and secondly the lender will want to vet the buyer to be sure that they will be able to make the payments you cannot.
Sell the Vehicle
Another option is to sell the vehicle outright. See if you can make enough off of the sale to pay off what you owe on your loan. If you can manage to be without your vehicle and you can get a good enough sale price, this can solve your problem in both the short and long term.
However, if you cannot sell the car at least for what you owe, you will still need to make up the remainder before you can transfer the title. Remember, even though you have possession of the car, you don’t own it as long as you still owe on the loan. The financing lender has a lien on the vehicle until it is paid off.
Less Attractive Solutions
Repossession, bankruptcy and the like are also options for getting out from under your loan. These, however, are never the best solution to pursue. For one thing, they will severely damage your credit, sometimes for a period of seven to ten years. They will make it difficult for you to get credit of any kind, including for a new vehicle. You are always best off to work with your lender for a better solution.
If you would like to refinance your car loan, we can help. Check out our refinancing page and give us a call to get started today.