Are your monthly debts weighing you down? Paying off an auto loan can be a struggle, particularly when you factor in other car ownership costs including insurance, fuel, and maintenance. Before you start falling behind in your payments, it’s time to take a hard look at your financial situation and see what your options are to reduce monthly bills. Burying your head in the sand will only lead to damaged credit and even repossession of your vehicle, so it’s better to take action sooner rather than later!
If you’re struggling to keep up with payments due to unexpected circumstances such as illness or job loss, you may be able to file a hardship application with your lender. The terms and conditions will vary between lenders, but some may offer you a “payment holiday” which allows you to suspend payments for a few months until you get back on your feet. It’s scary to call the lender, but they are usually willing to work with you as they’d rather get paid at some point than take a loss on repossession.
2. Refinance your Loan
Along these same lines, you may be able to refinance your loan to more favourable terms. If you’ve always paid your loan on time in the past and have decent credit, the lender may be willing to refinance the loan terms to a lower monthly payment. However, it’s important to realize that this means you’ll actually pay more money in interest in the long run, because the length of the loan will be extended.
3. Trade your Car In for a Cheaper Model
Have you simply purchased more car than you can really afford? Another option is to head back to the dealership and see if you can trade your car in for a cheaper model. You can use resources like Car Sales or Kelley Blue Book to find out your car’s value and examine more cost-effective options. Exchange policies will vary by dealer, but if your car is relatively new you may be able to trade it in at little cost. One thing to remember is that if you still owe more than the car is currently worth, you’ll need to pay the difference in value.
Could you get around without a car altogether until you’re back on your feet? You can sell your car independently and use the money to pay off your loan. As with trading it in, if you owe more than the car’s current value you’ll need to pay the difference. Think about taking out a small personal loan with lower monthly payments to settle your auto loan. Another option is to find a buyer who would be willing to take on your loan and continue to make payments. Some lenders will allow you to transfer the car ownership and loan to a third party.
It’s frightening when your bills pile up and you don’t know how you can afford to pay them, but the sooner you take action the better. Your car loan can often be negotiated, or you can switch to a more economical model in the meantime. It’s best to look at all of your options carefully before you start missing payments.
My name is Derek, and I have my Bachelors Degree in Finance from Grand Valley State University. After graduation, I was not able to find a job that fully utilized my degree, but I still had a passion for Finance! So, I decided to focus my passion in the stock market. I studied Cash Flows, Balance Sheets, and Income Statements, put some money into the market and saw a good return on my investment. As satisfying as this was, I still felt that something was missing. I have a passion for Finance, but I also have a passion for people. If you have a willingness to learn, I will continue to teach.