Should there come a point when you’re unable to afford your next car payment, it’s critical that you take the necessary steps to protect your finances and vehicle.
There are many ways to deal with this situation. There are also many things you shouldn’t do, starting with missing a payment and hiding from your lender. This will only make matters worse.
Here are some ideas to run through your mind:
1. Contact Your Lender
Doing so allows you to explain to them what’s going on. For example, if you lost your job as a result of the pandemic, your lender may be sympathetic to your situation and willing to modify your loan to suit your financial circumstances.
Of course, you’ll never know if this is a possibility until you reach out and discuss your options. When you neglect to do so, you put your lender in a bad spot, as they’ll send your account to collections (which dings your credit score) and could eventually seek to repossess your vehicle.
2. Sell It
This makes perfect sense. Even if you love your car and want to keep it for as long as possible, your finances may dictate that you take a different approach.
As long as the vehicle is worth the same or more than what you owe, you’re in position to make this move. Conversely, if your vehicle is worth less than the balance, you’ll need to contact your lender to see if there’s anything they can do for you.
3. Refinance the Loan
Many people are familiar with refinancing their mortgage, but they don’t ever give this a second thought when it comes to their vehicle.
By stretching out the term, while possibly lowering the interest rate at the same time, you end up with a lower monthly payment. As a result, it’s easier to afford, thus allowing you to stay current in the future.
Tip: don’t refinance with the first lender that’s willing to help. Compare three to five lenders to find the one that offers the most competitive rate for a consumer with your credit score.
You never want to find that you can’t afford a monthly payment, but this could happen at any time. And if it does with your motor vehicle, you shouldn’t panic. Review your situation to determine the best plan of attack and then take action.
It’s scary to slip behind on your car payments, but it’s not the end of the world. With the right strategy, it won’t be long before you’re back on track and feeling better about staying current in the future.