Most auto lenders are considerate enough only to warn the debtors if they miss a repayment. However, you may face several negative consequences if you keep missing your dues. First, every missed payment might incur late fees, and even if you start repaying your auto loan, it might still affect your credit score. You might also end up paying more interest on your loan since it will probably take longer to pay off.
In worst-case scenarios, the lender might send a demand letter or an email about the missed payments and threaten to repossess the vehicle. Fortunately, several institutions provide help with repossession, and you can ask for a consultation to see if you’re eligible for their assistance. Still, you must try your best to avoid reaching this point.
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What Can You Do if You Miss Your Car Payments?
If you’re unsure what to do after missing several car payments, it might be hard to recover financially. If not, you might try to pay for the loan for many more months or years. If you’re struggling to make car payments, here are five ways to consider it.
Talk to Your Lender
As much as you don’t want to worsen your situation now, your lender probably feels the same. If you feel like you might miss your car payment this month, the best thing you can do is to talk to your lender about it directly.
Tell them your current situation and that you’re struggling. Ask them if they have a relief program or other services you can apply for. Some financial institutions can pause monthly payments without penalty, depending on your situation.
Also, while you’re discussing options, prepare to suggest an amount that you can afford to pay in the short term. Note that other things might be changed from your loan contract to accommodate your situation, such as changing your due date. Thus, request that your lender write the agreement so everything is clear.
Don’t hesitate to ask how this new agreement could impact your credit report. Then, ensure that the lender also mentions it in the written agreement.
Refinance Your Auto Loan
Auto loan refinancing means replacing your existing loan with a new auto loan from a different lender. This option could provide long-term relief if you’re a diligent payer with good credit. Maybe you’re struggling with repayment due to the high-interest rate or shorter term. Thus, refinancing can help you deal with lower interest rates or extend your loan term.
The only downside is that extending your term means a longer loan period, which means you might be paying more than your car is worth. Still, it’s a favorable option to fail to pay and have your vehicle repossessed.
Additionally, other institutions might provide longer terms but with more interest over the life of your loan. Thus, carefully consider your options and shop for other financial institutions or lenders you can apply for.
Sell Your Vehicle
If you feel you’re getting far behind your payments, selling your vehicle might be a far better option. However, this option might take a while since you need to do a few things.
Figure out your balance on the auto loan and research the market value of your vehicle. If your loan balance exceeds your vehicle’s value, you can sell it and use the proceeds to pay what you owe.
Before that, you must market your car in various ways, such as online selling or classified ads. This process might take a few months until you find a buyer who can pay you the amount you want. If you don’t sell your car enough to pay off your balance, it’s best to reconsider this option.
On the other hand, if your vehicle is assumable, you can try to find a buyer willing to take over your payments. You should ask your lender about it and check if your buyer meets their financial qualification.
Request a Deferral
Requesting for a deferral simply means temporarily stopping making payments. As mentioned, you can ask your lender about it if you’re struggling. If approved, you can be free from payments without penalties.
Remember that rules and requirements can differ for every auto lender, especially the number of times you can request a deferral. Some entirely prohibit this option, especially if you’re way behind on your bills. If your lender offers this option, request a deferral if you’re eligible.
Surrender Your Vehicle
The possible worst-case scenario is missing your auto loan payments to have your car repossessed by the lender. However, as a responsible debtor, giving back your car to your lender would be ideal before this takes place. Although this action can still negatively affect your credit score, it isn’t as drastic as involuntary repossession. It’s because you’re taking responsibility and taking the initiative for the loan you took.
Keep in mind that surrendering your vehicle doesn’t mean you don’t owe your lender anything anymore. The lender will sell your car or place it on an auction, minus the money they earned from your loan balance plus any additional fees.
In the end, if your vehicle was sold at an amount lesser than your loan balance, you will still need to continue paying for it. If you refuse to do so, they can sue you in court or send your remaining debt to collections. Either way, it will surely damage your credit score.
Final Thoughts
Taking out any type of loan requires great responsibility and financial capability. However, life can be unpredictable sometimes, and an event might affect your financial situation. You must consider your options if you struggle to continue paying for your loan. Always contact your lender and talk to them if you have any issues. You can also consider all the other options mentioned in this list to discover your following steps.
Barry Lachey is a Professional Editor at Zobuz. Previously He has also worked for Moxly Sports and Network Resources “Joe Joe.” He is a graduate of the Kings College at the University of Thames Valley London. You can reach Barry via email or by phone.
