Can’t Afford Your Car Note? Prevent Repossession Now

July 9th, 2009 • Related • Filed Under • by tisha

Like with most debt, the worst thing you can do to yourself and your credit score is to ignore it. There are some things 18x24_car_for_sale you can ignore and they just go away. Debt is not one of those things. Even ignoring it for a little while likely means it will double your trouble. With interest charges and penalties being tacked on, your debts can grow quickly even more out of control. When it comes to car payments, not only will you have mounting charges, you may also face losing your car.

Don’t Ignore The Situation
Instead of avoiding the problem when you can’t pay, you have to face it head on. Call your lender as soon as you know you will be having financial difficulties affording your car. Let the lender know why you are experiencing financial hardships (loss of job, etc…) and if you have an indication of when things will be back on track. The lender will want to be assured you have every intention of holding up you end of the agreement to pay and will likely give you some options for your situation. One idea is they will allow you to defer your payments. Instead of making a few of your regular monthly payments, they may move them to the end of your loan and give you some time to catch up. You will still be responsible for paying the deferred payments but not during the deferment period.

Refinance

Another option is refinance your loan balance and get a lower interest rate. This will help to lower your monthly payments each month to something that might be more manageable. In refinancing, you may also be able to extend the time length of your loan which will also help reduce monthly payments. Your lender should be able to discuss all of your options with you based on your financial abilities during the hardship.

Make The Sale

If none of these options will work for you, or you feel as though the vehicle you have costs you too much overall, consider selling the car – but only do so if you can be confident you can sell it for more money than you owe on the existing loan balance. If you are pretty certain that your personal finances will remain unchanged for several more months, selling the vehicle may be your best bet. Check online at the blue book values of your car and what other similar used vehicles are going for in your area. When you sell the car, pay off the balance of the loan as soon as possible to clear the debt. Shop for another vehicle that will save you money in maintenance and operating costs.

Lenders do not want to repossess. They would much rather keep a customer and work with you during financial difficulties as long as you work with them. If you avoid the obvious difficulties in paying your car note, a repossession will ruin your credit score, making it even more difficult to handle your personal finances in years to come.