You’ll need to study to know what your car is worth and negotiate for a fair price. Trading in your car for a less expensive one could solve your problem. That only works if the loan is assumable – not all are – and the buyer meets the lender’s financial qualifications. If you don’t sell it for enough to pay off the loan, you’re going to have to come up with the difference another way.Īnother possibility is finding a buyer who is willing to take over your payments. But if maximizing the money is your motivation, it’s the way to go. It requires time to market the car through online or classified ads, and it might take a month or so to find a buyer who’s willing to pay what you want. Take an example from Kelley’s online site: A hypothetical black 2017 Toyota Camry with 30,000 miles in good condition had a trade-in value of $14,443 but a private sale value of $16,494 – a difference of a little more than $2,000. If you decide to sell your vehicle to pay off your loan, selling is financially wiser than trading it in – often 15% to 25% better, according to Kelley Blue Book. If you’re in a family with more than one car, maybe you don’t need them all. Or, perhaps COVID has you working from home rather than commuting daily. If you live in a city with good local transit, you can save a lot of money – not only on car payments, but gas, insurance and upkeep. You might want to ask yourself an unexpected question: Do you really need a car? More narrowly, do you really need that specific car that you’re driving? Shop it around to a local lending institution. But that still can be better than failing to pay and have the car repossessed.ĭon’t just talk to your existing lender about refinancing. You’ll be paying on the loan for a longer time, which means you’ll ultimately pay more for the car by the time the loan is paid off. Again, paying on time is important. If you’ve been missing payments, you’ve shot yourself in the financial foot.Įxtending the terms of the loan can improve your immediate cash flow problem, but it comes at a cost. To get a lower interest rate, your credit score will need to be better than when you got the existing loan. By lowering your interest rate or lengthening the term of the loan, you can lower your monthly payment. Maybe a reason you’re struggling to pay your car loan is it has a high interest rate. The federal government urges lenders to work with consumers during the COVID crisis, so ask. When you make the call, be prepared to suggest a payment amount you can afford in the short term. Some financial institutions are willing to pause payments for a month or so without penalty, especially if you always paid on time. Tell them you’re struggling and ask if they have a relief program you might qualify for.
So, if you can’t make a payment, contact your lender before you get behind on your car payment. The process of collecting overdue debts costs lenders money, and they’re unlikely to recoup what your car is worth through repossession. The good news is that your lender doesn’t want the situation to deteriorate any more than you do. The repercussions can stick with your credit rating for years, making it hard to borrow money again, and increasing the interest on any loan you do get. Worse, you could still owe money on your former car after you no longer have it. If you can’t resume payments and get caught up, your car can be repossessed. Each month you miss a payment lowers your credit score. What Happens When I Miss a Payment?Ī lot of bad things can happen when you stop paying your car loan. Here’s what to do if you can’t pay your car loan. No matter why you’re in that situation, you’ve got to take action.
The coronavirus-inspired shuttering of businesses and Congress’ inability to agree on a second relief package has sent many more into delinquency. Even before the COVID-19 pandemic sent the economy into a tailspin, millions of Americans were 90 days or more behind in their car payments.
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