When You’re About To Default On Your Car Payments
Even in a strong economy, millions of people struggle to make their car payments. Of course, the past twelve months have been dismal in the automotive industry. And with the economic environment growing darker each day, more people are losing their jobs and looking at their late-model vehicles as expensive liabilities. If you’re having trouble making timely car payments, you have alternatives. Today, I’ll explain the options available to you.
Working With Your Lender
When people fall behind on their auto loan, they often choose to avoid the lender. That’s a mistake. Not only does the lack of communication frustrate the lender, but it effectively eliminates your chance of working with them. For example, they might be willing to defer your next payment. The lender will want to know the details of your situation, including why you’re falling behind and your current credit score. Be open with them. They can often help you bring your account current.
Refinancing Your Auto Loan
Interest rates have dropped significantly over the past year. Most people think of a decline in interest rates in the context of refinancing their homes. You can just as easily refinance your auto loan. If your credit score is reasonably good, there are plenty of companies that will help you refinance the terms of your loan to lower your monthly payments.
It’s also worth noting that higher interest rates can often have the same effect on the amount you need to pay each month. That’s due to some lenders being willing to stretch the terms of your loan over a longer period of time. It’s more expensive over the long run, but you’ll end up with lower – and perhaps more manageable – monthly payments.
Selling Your Vehicle
You can also sell your car if you’re falling behind. However, this requires some clarification. Even though you drive your vehicle off the dealership lot, you don’t actually own it. The title rests with the dealer. In order to sell your car, you need to transfer the title. The only way to do that is by paying off your current auto loan.
Sometimes, given your situation, the value of your car will exceed the amount you owe. If that’s the case, it’s a simple transaction; sell the vehicle to the new buyer and use the money to pay the lender. The title can then be transferred to the buyer. On the other hand, if your vehicle’s value is below the amount you owe the lender, selling it leaves a deficit. You’ll need to make up the difference before the title can be transferred to the buyer.
You’ll notice the option that I’ve neglected to mention is allowing your vehicle to be repossessed. That is always a mistake. It will damage your credit and impact your ability to get an auto loan with a competitive rate in the future. Remember, you have plenty of options if you’re falling behind on your car payments. The key is taking action to resolve the problem as quickly as possible.
