How to Buy Yourself Time if You Can’t Pay Your Auto Loan
Having a car is great until the costs start to add up. And if they reach a point where you feel buried in car payments, you’ll need to create a plan, a way out. Rest assured, though, that there are ways to buy yourself time even if you feel as if you can’t afford your car loan payments anymore. You just need to take a closer look at your finances and spending habits (income and monthly expenses) to see how you can put money into your car payments.
Speak to your lender if You Can’t Afford Your Car Loan Payment
The most important step you can take is to speak to your lender. In fact, it should be the first thing you do. You might feel uneasy about telling them you’ll have trouble making payments, but at some point they’ll have to know because they will see it when you start missing payments. So break the ice early. If you explain to them that you’re in a difficult situation, they can make arrangements to make these payments easier for you.
Time for a negotiation
- Seek refinancing if possible – Your lender may be open to extending the duration of your loan, by reducing the rate you pay. The purpose of this is to lower your monthly payment, so that it’s affordable over time. Keep in mind, however, the longer loan terms can mean paying more over the years due to interest charges.
- Ask for a deferral – If you’ll only have difficulty making a payment for a short period of time, you can ask for a deferral. In other words, a lender will collect your payment at a later date. If you plan on taking this route, however, make sure that you’ll only have to do it for a couple of months at most.
- Trade in your vehicle – If it looks like you’ll have difficulty paying up for several months, you may have to consider trading in your vehicle. This option will take some time since you’ll have to find the best option available. However, keep in mind that the trade-in-value of the car may be less than the balance you owe.
Tap Into Your PPI
If you are one of the people who has payment protection insurance (PPI), then you can use it if you suddenly can’t afford your car payment. This is an insurance product usually offered by banks and credit providers. Essentially, if you experience a job loss, illness or some other hardship, the PPI kicks in to help you pay your debts.
They’re not perfect – they cover the minimum payment for a period of time (ie. 1 year) – but they can prevent you from experiencing a big dip in credit score. Avoiding a drop in your score is even more important if you already have damaged credit.
The terms of PPI coverage varies depending on who offers it, so make sure to speak to your bank if you plan to use it. They’ll break down the specifics of eligibility, how much money you’re entitled to, and what it covers specifically.
Why You Need a Resolution
If you feel like like you can’t afford your car loan payments anymore, it goes without saying that your situation needs immediate attention. If you’re still hesitant about speaking to your lender, remember a few things.
Credit score damage
Once you start missing payments, you collect what’s known as delinquencies. And they don’t look good on your record. They’re one of the reasons why people suffer from credit issues in the first place, so collecting a few of them can lower your score.
When delinquencies appear on record, they affect all future transactions including loans that you may seek approval for in the future. Lenders see this as a sign of irresponsibility (even if financial problems beyond your control caused it), and could decide not to give you the loan in the future.
Car repossession is a possibility
Car repossessions are by no means pleasant. They affect your credit rating, stay on record for seven years and cost you quite a bit to have your vehicle returned. It’s much better to be open and honest about your difficulties with your lender, so that they can make arrangements for you. This way, you won’t have to struggle without any understanding or support.
The Curvy Line Called Life
When someone says they’re having a hard time paying their bills or debts, others might be quick to put the blame on them. And it’s not fair. Life resembles the lines on a graph – not only are there ups, there are also downs and these patterns affect everyone. Even people who are truly responsible with their money can face events that can drain their pockets or strain their income.
When the unexpected happens
- Job Loss – Employers are handing out more pink slips than ever before, and many hard-working individuals are losing their livelihoods. If this happens to you, it’s completely understandable why paying for things like an auto loan would be difficult.
- Illnesses or injuries – Here in Canada, doctor’s visits, prescriptions and tests are often covered by insurances. However, many people with certain conditions still have out-of-pocket expenses. Again, it’s understandable why you would have difficulty paying a loan if those costs were too high.
- Property damage not covered by insurance – Insurance providers don’t offer protection for all damages that nature may inflict on your home, car or other properties (“Act of God”). As a result, you might be stranded in a position where you either pay for your own repairs, or ignore your health and well-being to make other payments.
Settling the Score if You Can’t Afford Car Payments Anymore
Roger Crawford, a former professional tennis player and now well-known motivational speaker, who’s battled serious disability said, “Being challenged in life is inevitable, being defeated is optional.” The same goes for those in financial difficulties.
When it seems like your debts are burying you alive, you have to look beyond your usual pattern of thinking and you’ll need help. As seen throughout this post, there are some options to consider if it seems you can’t afford your auto loan payments anymore.
Don’t allow yourself to crumble alone under the pressure. Like a number of people who have gone through what you are enduring, you can get out of what seems like a never-ending dark tunnel.