What to do when you can’t afford your car payment Advertiser Disclosure Advertiser Disclosure We are an independent, advertising-supported comparison service. Our mission is to help you make better financial decisions by providing you with interactive tools and financial calculators as well as publishing original and impartial content. This allows you to conduct your own research and compare data for free to help you make informed financial decisions. Bankrate has agreements with issuers, including but not restricted to, American Express, Bank of America, Capital One, Chase, Citi and Discover. How We Earn Profit The deals that are advertised on this site are from companies that compensate us. This compensation may impact how and when products are featured on this site, including the sequence in which they be listed within the categories of listing in the event that they are not permitted by law. This applies to our loan products, such as mortgages and home equity and other products that lend money to homeowners. This compensation, however, does not influence the information we publish, or the reviews you read on this site. We do not cover the universe of companies or financial offers that may be accessible to you. Westend61/Getty Images
4 min read . Published April 19 2022.
Dan Miller Written Dan Miller Written by Points and Miles Expert Contributor Dan Miller is a former contributor to Bankrate. Dan wrote about loans home equity, loans and managing debt in his work. Edited by Rhys Subitch Edited by Auto loans editor Rhys has been writing and editing for Bankrate since the end of 2021. They are passionate about helping readers gain the confidence to manage their finances by providing clear, well-researched information that breaks down complicated subjects into digestible pieces. The Bankrate promise
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We are compensated in exchange for the placement of sponsored products or services, or when you click on certain links posted on our site. This compensation could affect the way, location and when products appear within listing categories in the event that they are not permitted by law. This is the case for our mortgage, home equity and other home lending products. Other factors, like our own website rules and whether a product is offered in the area you reside in or is within your personal credit score can also impact the manner in which products appear on this site. We strive to offer the most diverse selection of products, Bankrate does not include details about every credit or financial product or service. One of the most important aspects of creating a successful budget is fitting all of your monthly expenses within your income. As part of your ongoing review of your budget, you could be in a position in which you feel you can’t afford your car expenses. If that’s the case, you have several options to find relief. Each option comes with its own advantages and disadvantages, and it is important to study them carefully to determine which one is the best for you. Contact the dealership to request a trade One of the first steps that you can do is to reach out to your dealer and see if you can swap your car for a more affordable version. This could be easier to determine if you originally bought your car through the dealership and your loan is funded through it. This could make the dealer more receptive to making arrangements with you. Even if this isn’t the case it is worth contacting the dealer to find out what options are at your disposal. Based on the cost difference between your new and current cars, and also the time and conditions, you might be able to save a significant quantity of dollars by changing purchasing a less expensive car. Be aware that the current market may make trading your car a bit more difficult. The prices of used cars have climbed significantly over the last few years ago. Also, depending on the type of vehicle you’re trading in and what kind of car you’re looking to purchase this could prove more difficult than you anticipated. Request a loan modification Another option that you can consider if you are unable to make the monthly car payment, is to apply for the loan modification . With a loan modifications, you negotiate in conjunction with your lender to alter the terms of your loan. It could mean lowering your interest rate, deferring payments for a period or altering your due date so that it is better with your plans. A loan modification could also extend the duration of your current loan. This will usually lower the monthly payment, however you’ll be paying more interest over the course of the loan. You should be careful and make sure that the numbers work for you before agreeing to any modifications. Refinance your auto loan If your lender does not want to alter the terms of your loan, you also have the option to . It is possible to shop around and prequalify with several lenders to get the best rate and conditions. If you have accounts with the local credit union or bank it is possible to find better rates there because you have a long-standing relationship with them. When you are considering refinancing your car loan determine whether you’re eligible. Even the case that you have a bad rating on your credit report, you could be eligible to if you are able to pay off your car loan quickly or you have increased you credit scores. Also, check to see if there are any fees associated with refinancing an auto loan. Some fees include an early termination fee as well as transaction fees and state registration fees. insurance costs for autos and late payment fees. Think about this as a possible process to refinance your car: Decide if refinancing is the best option for you financially. Review the current loan. Review your credit score. Calculate the value of your vehicle. Compare refinancing rates. Determine how much you’d save when refinancing. Complete your paperwork. Sell privately and buy within your budget. If can’t afford your car payments in the present, a different option to consider is to sell your car privately and then buy a new car that is more compatible with your current budget. There are a few more steps in , but it is still definitely doable. It is particularly favorable for the sale of a secondhand vehicle, with prices substantially higher than in previous years, so you may be able to get an excellent price. Of course, the other downside to a highly-priced second-hand car marketplace is that it may be more challenging to find a replacement car that fits your budget. It is important to research the market thoroughly and know how much it will cost to buy your replacement vehicle. This will give you an idea of the amount you’ll save by changing vehicles and if it will be worth it for you. Get help from your family and friends assistance. The last option could be to approach friends and family for assistance. This may or may be the best option for you depending on the relationship you have with your relatives and friends, as well as their financial situation. But if you’re in a circumstance where you’re unable to pay the cost of your car, speaking to those who are close to you may be a good avenue to think about. Be aware that help from family and friends doesn’t have to have to be financial. While it would be great to have a wealthy uncle who could take care of your loan quickly, the majority of us are not in that type of scenario. But in addition to possible financial aid, your friends and family might be looking to sell their car or know someone who is. Those kinds of connections might assist you in saving money. If you’re in a situation where you can’t afford your car payment, acknowledging and taking stock of your finances is the most important step. Ignoring the situation or, even more serious, failing to pay to your auto loan will cause major problems with your overall financial situation. After you identify the problem then you need to look into the options. Call your lender first, to see whether they’re willing to alter the terms of your loan. Lenders don’t like modifying existing loans however, they don’t like repossessing cars. Make your case as to why it is important to modify your loan to ensure you continue to make payments. Based on your personal situation as well as your credit rating, you might be able to refinance your loan and potentially save cash. Make sure you research the costs related to refinancing and understand the conditions of your loan contract before making any decision. Frequently asked questions What do I do if I’m not able to afford the car payment? If you are unable to pay for your car loan it’s the right time to act. Consider your options below: reach to your lender and determine if you are able to defer payments, look into the possibility of obtaining an alternative loan or swap your car in for a new one, sell it or surrender your vehicle in a voluntary manner. What are the fees for refinancing an automobile loan? Fees associated with refinancing an existing auto loan might include early termination fees, transactions fees and state registration fees. They also include auto insurance cost, late payment fees and an upfront cash payment. Are there ways to refinance an auto loan with a poor credit score? You may be eligible for a refinance loan even if you have a low credit score. Learn more
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The article was written by Points and Miles Expert Contributor Dan Miller is a former contributing writer for Bankrate. Dan was a writer for Bankrate who covered loans as well as home equity and managing debt in his work. The article was edited by Rhys Subitch Edited by Auto loans editor Rhys has been writing and editing for Bankrate since late 2021. They are committed to helping readers to take control of their finances by providing clear, well-researched facts that break down otherwise complicated topics into digestible pieces.
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