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How to Take Control of Overwhelming Car Payments

When unexpected life events happen, it can cause you to no longer be able to afford your car payment. Or, maybe you realized down the road that the car you chose is way out of your budget. Whatever the reason may be as to why your payments are taking a toll on you, there are steps you can take in order to help your situation. It’s important that you take these steps quickly though, in order to avoid a missed payment or repossession.

I’m going to tell you what steps you need to take in order to make your car expenses better fit your budget and hopefully, get back on track!

1. Before Skipping a Payment, Talk to Your Lender
You know the saying: it doesn’t hurt to ask! Instead of assuming that missing a payment is your only option, talk to your lender first and see what he or she can do for you. It’s important to communicate with your lender because they may be able to work with you instead of just taking back the car. If you explain your situation, your lender can give you the option to skip payments for a period of time, or reduce your payment amount. Your lender may need to extend the number of months you need to make payments, and you may end up paying more in interest, but it’s definitely better than a repossession that will damage your credit!

2. Calculate the Numbers
Before you proceed any further, you need to take a better look at your situation and check your numbers.
First, use an online pricing guide to find out your car’s value. You need to know how much your car is worth. Next, confirm with your lender how much you owe. Finally, determine what your interest rate is and how many months you have left before the loan is paid. You’ll have positive equity if you owe less than the value of your car. This will give you more options, like refinancing or downsizing. If you have negative equity, or owe more than the value of the car, it may be a little harder.

3. Create a Plan
Your best approach is to create a realistic plan based off on how much you can actually afford for a long-term solution.

These are your options if you have positive equity:

  • You could refinance by doing a little shopping around and contact banks, online lenders and credit unions to refinance your car loan. There are many auto refinance calculators available online that you can use to see how much money you could save with a longer term or lower rate. Plus, these online tools are completely free!
  • Or, you could downsize if you trade in your car or sell it to a dealer and free yourself of the high car payments. To get the most out of this option, consider using your current car’s equity as a down payment towards a less expensive car. Or, if you have enough cash, buy a cheaper or used car.


Now, if you have negative equity, this is what you can do:

  • Catch up and downsize by paying the difference between the value of the car and what you currently owe. You can use cash, or take out a small loan if needed. Sell the car or trade it in for something less expensive. If you trade in your car with negative equity, you still need to pay the difference.
  • Find savings in other areas! A lot people forget that you don’t have to stick with the same car insurance. Shop around for better deals and if you find cheaper car insurance, you could use the money you are saving towards your loan.
  • Talk to your lender if you are upside down on the loan. Your lender may help you find other options if you need to keep the car. Again, it doesn’t hurt to ask.

Knowing your options ahead of time and taking action right away can help you avoid damaging your credit in the event that you can no longer afford your car payment

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