What If You Can’t Make A Car Payment?

July 13, 2009

This topic can come up in good times but is even more likely to come up these days. The money’s not coming in or you had more going out this month than you expected so you just can’t make your car payment. What do you do? Is there a good way to handle this situation? Of course, the best course of action is to never get into this predicament but if you cannot avoid it then here is what you should do.

Tell Your Lender

This is the first step and the one you probably least want to take. It can be embarrassing to admit that you cannot make your payment, but a lender is likely to appreciate your honesty. You can even put in an inquiry to find out how much your car is worth at this point in time. Its market value could end up being worth more than the amount that you still owe on the car. In this case, you could sell the car to pay off the loan.

When you call your lender is likely to ask the following questions. Why can’t you make your payment this month? What is your current financial situation? Your lender will need to know your situation before they can figure out what help they might be able to offer.

You May Have Options

You might have the option of deferring your regular car payment for an additional thirty days. The possibility of this option depends on your credit score, payment history, why you cannot pay, and other details of your situation. You could also refinance your loan which may not be a bad option. There is a chance then you may end up with a better interest rate than when you started.

Another option is to choose a higher interest rate. With a higher interest rate, your loan will be spread out over a longer period of time and would allow you to make smaller payments on a monthly basis.

What You Want To Do

When you are in this situation, you want to find a way to work it out. You do not in any case want to let your car get repossessed. If your car is repossessed then it will then be sold at auction. If the car is sold at the auction then you will still have to pay the remaining amount on your loan minus the money brought in at auction. This amount will still be significant, and you will be paying it even though you will probably never see that car again.

Your credit will also take a hit if you allow your car to be repossessed. This repossession on your record will make it more difficult for you to get any type of loan in the future. Poor credit, as you well know, can have other adverse consequences as well.

When you cannot make a car payment, you want to find a way to make the best of the situation. You may be lucky and be able to defer your car payment for thirty days. If not, you need to seek out another way to avoid repossession. Negotiating a new loan with new payments is one option. Selling your car to make enough money to pay off the loan is another. This unpleasant situation will end up a lot better if you just face it head on.