Since your car loan is probably the second biggest financial decision you make, next to a mortgage, it is really important you do what you can to prevent a default notice and a visit from the repo man. As soon as you know you are headed down the road of not being able to make your car payment during any month, there are some things you can do to prevent a financial disaster.

Contact the Finance Company
Most lenders will work with payment issues on a case by case basis. The worst thing you can do is avoid the lender altogether. Once they have to start calling you looking for money, your credit is headed for trouble. Start by contacting a company supervisor and explain the situation. Be honest about why you can not pay. They have likely heard every excuse in the book but if you are straightforward with them, a mutually beneficial compromise can often be made.

Change the Payment Due Date
If it is a matter of not being able to cover the costs of your car note during a particular time of the month, you can check with the lender and see if you can change the date to one that is easier for you to meet each month. If you can change the due date permanently, ask if the lender would be willing to cut you a break during the month and push back your due date by a week or two until you can catch up and to forgo any late charges you would otherwise incur.

Look to Refinance
If your credit rating is still considered great, you may be able to refinance your original loan. This refinancing deal can extend the current term of the loan and make your new monthly payments lower and more manageable.

Revisit the Original Loan Terms
If you originally took out your car loan for a 36 month term, see if it is possible to extend it to 48 months. This can help lower your monthly payments but will also add additional costs to the overall loan. Lenders may also hit you with a fee for changing the loan terms but it is definitely a better scenario than destroying your credit or losing your car to the repo man.

Defer Your Payments
If you are finding it hard to catch up on paying bills, you may want to consider a deferred payment option. By deferring a payment, you will essentially be allow to skip a payment, which ultimately will be added on to the end of your original loan. By having a month’s jump on paying your loan, you may gain a bit of flexibility.

Inquire About Late Charges
If you are having problems making a payment due to past late charges that have accumulated on your account, ask your lender to waive these fees. Usually, if you can prove that these added charges are making it more financially difficult for you to make on-time payments in full, they will be willing to work with you.

Don’t Default on Your Car Loan – Here’s What You Can Do was created by and is property of American Consumer News.

Defaulting on a student loan involves missing nine straight months of payments on your loan. Your lender may turn your account to a third party collection agency which will probably tack on heavy penalties and charges until your debt is satisfied. Because college loans may run in the thousands of dollars already, you are potentially facing an even greater debt than you initially started with. In addition to the fees and charges, you could be sued for repayment. You may also face wage garnishment and up to 10% of you paycheck can be taken to repay your loan agreement. Any income tax refund you expect will be seized as well. If you even planned on returning to further your education, you can forget about qualifying for any other financial aid. In addition to all the action that can be taken against you, you also need to repay the loan in its entirety.

Before you fall into a default status, there are two avenues you can take to ensure your account does not go into default and get turned over to a third party collection agent. Both options are relatively uncomplicated and all you need to do is contact your student loan lender for details on how you can take advantage of the options.

Deferment

A deferment is basically temporary relief from paying your debt for up to three years. You can usually take a deferment more than one time over the life of the loan depending on your situation, as long as the time period does not extend past the deferment term. You will still be responsible for repaying the interest that has accrued during the deferment period, unless you loans have been subsidized by the government. In order to qualify for a deferment, your lender typically will require you to fill out an application and get approved before the deferment will take place. Until the time of approval, you must continue to make your monthly payments on time. You can not file for  a deferment if you have already defaulted on your loan.

Forbearance

Forbearance is an option for people who do not qualify for a deferment but still need assistance in making monthly payments. Like the deferment, you are still responsible for paying accrued interest, however subsidized loan holders are also required to pay the interest. A forbearance period only can run for a one year time period or less but you can renew it for up to a period of three years.

Qualification for both will depend on your working status, your income to debt ratio, and your situation of financial hardship. You may also be considered qualified if you serve as an AmeriCorps volunteer or participate in a public service volunteer program. Qualifications are dictated by each individual lending company and you should contact you lender for the most up to date information and application packages.

Avoid Default When Struggling With a Student Loan was created by and is property of American Consumer News.