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Help! I Can’t Pay My Car Payment

By Spodek Law Group | February 20, 2024

I Can’t Pay My Car Payment – What Should I Do?

Missing a car payment can be an incredibly stressful situation. With late fees piling up and threats of repossession looming, it’s normal to feel overwhelmed. But there are options available to help you get back on track. This article provides practical guidance on steps to take if you find yourself unable to make your monthly auto loan payment.

Communicate with Your Lender

The first and most important thing is to contact your lender or financing company as soon as possible. Ignoring the issue will only make matters worse down the road. When you call, explain your financial situation openly and honestly. Key details to provide are:

  • Why you missed or will miss the payment
  • Whether this is a temporary or long-term issue
  • Your desired solution, if you have one in mind

Lenders want to help you, within reason, to avoid repossessing your vehicle. So go into the conversation cooperatively. If you have some ability to pay, but just not the full monthly cost, offer what you can. They may provide options like temporarily reducing your payment or tacking the missed months onto the end of your loan.

Explore Loan Modification Options

There are a few main ways a lender may agree to modify your loan to make it more affordable:

  • Defer payments: Payments are paused for 1-2 months (unpaid interest still accrues)
  • Extend loan terms: Total loan length extended so monthly cost goes down
  • Lower interest rate: Interest rate reduced to decrease monthly payment

To get approved for a loan modification, draft a “hardship letter” clearly explaining your situation and financial limitations. Provide evidence like bank statements, pay stubs, or bills. Honesty and documentation are key. This shows the lender you’re acting in good faith.

Refinance With Another Lender

If your current lender won’t work with you, refinancing your car loan with another company may be an option. This allows you to stretch out loan repayment terms, score a lower interest rate, or even cash out some equity to get caught up on payments.Just be aware that refinancing restarts your loan terms. You will likely need to finance for longer versus your current repayment schedule. Run the numbers carefully to ensure lowering your monthly payment via refinancing makes sense long-term.

Assistance Programs

Non-profit organizations like the National Foundation for Credit Counseling (NFCC) or Humble Dollar offer financial advice and assistance to those struggling with debt. They can help negotiate with lenders and develop debt management plans.Your local Consumer Credit Counseling Service (CCCS) office also provides free or low-cost guidance. They have experts who can consult on budgeting and even help organize a reduced car payment schedule. Checking if these kinds of assistance programs are viable for your situation is worth the time.

Sell Your Vehicle

When you’re severely behind on payments with little chance of catching up, voluntarily surrendering your vehicle to the lender could be the best route. While not ideal, it’s preferable than damaging your credit through involuntary repossession down the road.If your car is worth more than you owe, consider selling it privately or trading it in. Use extra funds to pay back your loan so you avoid being upside down. Just be sure there are no prepayment penalties or early termination fees in your financing contract first.

Explore Car Sharing Programs

Peer-to-peer car sharing platforms like Turo allow you to rent out your vehicle when not using it. This can provide some supplemental income to put toward your monthly auto loan payment.You set your own availability, pricing, and qualifications for who can rent. Turo even provides insurance protections. If you have a spare vehicle or don’t drive much, renting through a sharing service may be able to help offset payments.

Change Habits and Budget

Getting your auto loan payment back on track requires looking closely at your budget and cutting unnecessary costs. Brainstorm ways you can earn extra income for the next few months through a side gig or part-time job as well.

  • Analyze bank/credit card statements to identify waste
  • Call service providers to downgrade or cancel subscriptions
  • Meal prep at home rather than eating out
  • Temporarily limit discretionary spending
  • Use public transit or carpool to save on gas
  • Rent out extra space in your home

With creative thinking and some temporary lifestyle changes, you may free up enough cash to at least cover the minimum on your monthly car payment.

If you’ve exhausted all options and surrendering the vehicle is inevitable, consult a consumer protection attorney. An lawyer can provide guidance on ensuring proper protocols are followed by the lender, protecting your credit score, avoiding repossession deficiencies or tax consequences, and discharging remaining loan debt. They help ensure your rights are protected.

Don’t Panic – You Have Options

The prospect of losing your vehicle can be downright scary. But take a deep breath and know there are always alternatives available, even if they require some work and sacrifice. The key is facing the issue head-on before it snowballs.With proactive communication, willingness to adjust your budget, and tapping assistance resources, you can likely get your car payments back on track. This article outlined some practical starting points to guide you in the right direction. Reach out for help and take it step-by-step.

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