There are few things worse than the horror that accompanies not being able to make your car payment. Worrying about bills is bad enough, but the thought of losing your car can add undue stress to an already tense situation. Missing your vehicle can keep you from getting to work, making doctor appointments or keeping important family obligations. Fortunately, repossessing your car is usually the last resort for most lenders. DriverSide has a few quick tips to help keep you driving when your finances get tight.
1. Be upfront with your lender.
You might feel like you need to hide your financial situation from your lender, but your best bet is to be as upfront and honest with them as you can. Get on the phone with a loan officer at the bank and explain your situation. Banks have some leeway when it comes to handling your loan, and odds are they’ll do what they can to keep your business. Above all else, don’t lie and say you’ll make future payments when you know you can’t.
2. Understand what you owe.
While you’re speaking with your loan officer, go ahead and ask exactly how much you still owe. In some cases, you may owe less than what the car is actually worth. If you think you can sell the car for more than what’s left on your loan, go for it. You’ll be able to pay off the bank and keep your credit out of the dumpster at the same time. If that’s not an option for you, there’s still hope.
3. Explore your options.
Depending on your payment history and credit, a lender may be willing to work with you for repayment. Banks have a few tools to help you get your payments back on schedule, including deferment. Basically, this allows you to hold off on sending in your payment for around 30 days. It may not seem like much, but giving you a month to save up for that bill can make a huge difference. It’ll also buy you some time to look into other options.
4. Look into refinancing your loan.
If your current lender is no help, it might be in your best interest to try to refinance through another institution. Banks aren’t exactly handing out cash by the bushel like they were a few years ago, but there are still loans available for individuals with good credit and solid payment histories. You may be able to find a loan with a lower monthly payment, even if it means paying over a longer term. Your monthly car payment shouldn’t be any more than 15 percent of your income, so if one has changed, so should the other. It’s just another way to get your monthly expenditures under control in a bad situation.
5. Don’t let your car to become repossessed.
While repossession is likely the last resort for a lender, do whatever you can to avoid having your car picked up by the repo man. Car repossession is disastrous for your credit and will haunt you for years to come. The bank will then auction off your car at well below its worth, and if they don’t receive what you owe on the car, you’ll be stuck making payments on a car you don’t even own anymore. It’s the worst of all situations, so do what you can ahead of time to prevent it.