What shouldn t you do if your car loan suddenly becomes too expensive?
However, one thing you should NOT do is to simply stop making payments or default on the loan. Defaulting on a loan can have serious consequences such as damaging your credit score and potentially leading to repossession of your vehicle.
You should keep making monthly payments and call the lender to explain the situation so your car does not get repossessed. You should not contact any company that claims they can lower your monthly payment or keep your car from being repossessed because you could lose more money and your car.
- Call the finance company and let them know you are unable to make your (one) car payment and they can defer your payment to the end of the payments scheduled on the loan.
- If you are falling behind in financial obligations, it is better to defer a payment than risk repossession.
To get out of an upside-down car loan, consider making extra payments, refinancing or selling the vehicle. To avoid being upside down on your loan in the first place, shop around for good rates and try a larger down payment or a shorter repayment term.
Consider Selling the Car
By selling it, you can be in control of the process, and you may be able to get enough cash in the sale for a down payment on a less expensive car. Alternatively, you can visit a dealership and see if you can trade in your car to cover part of the purchase price for a cheaper vehicle.
If the cost of repairs exceeds the car's value, it's probably best to get a new car instead. Sometimes, when a car with high mileage needs a significant repair or if your car is totaled, you might consider replacing it with a new or used vehicle.
If you have negative equity in a car, consider these options: Wait to buy another car until you have positive equity in the one you're still paying for. For example, consider paying down your loan faster by making additional, principal-only payments. Sell your car yourself.
If you're worried about missing a car payment, contact your lender and request a deferral. Alternatively, you could refinance your auto loan, sell the vehicle, ask family or friends for help, increase your income or voluntarily surrender the car.
- Income. Spend no more than 10% of your salary on transportation expenses, including car payment, insurance, and fuel. ...
- Existing Debt. ...
- Financing. ...
- Taxes and Fees. ...
- Car Insurance Premiums. ...
- Maintenance Fees. ...
- Fuel.
Voluntary car repossession is when you arrange with the lender to return the car on your own terms, rather than forcing the lender or collection agency to find and repossess the car.
Can I return my car to the dealership if I can't afford it?
In some instances, a dealer may accept the return of a financed vehicle if it's necessary to avoid repossession. What's important to keep in mind here is that a vehicle's value depreciates quickly. Even after just a few months of ownership, you may owe more on the car than it's currently worth.
- Sell the Car.
- Renegotiate the Terms of the Loan.
- Refinance the Loan.
- Pay off the Loan.
- Consider a Voluntary Repossession.
- Other Options.
- Getting Out of a Car Lease.

If it's possible for your budget, paying extra towards your auto loan can be a good idea. Making principal-only payments on your car loan can help you build equity, save on loan interest and pay off the loan faster. But make sure you allocate extra payments in a way that saves you the most money.
Yes, you can trade in a financed car, but you still have to pay off the remaining loan balance. However, this is not as intimidating as it sounds.
If there is no value in repairing the car, consider scrapping it for parts to make some money off the vehicle. You may have to pay to have a shop impound your car if it's no longer usable. Do your research when replacing or repairing your car to ensure that you get the best value.
You can renegotiate, refinance or sell your vehicle to get out of a car loan you can't afford. Refinancing can be a good option if your credit score has improved since you initially took out the loan.
Negotiate with the mechanic.
Talk to the repair shop about any discounts that might be available, or any payment plans that for which you could apply. Some repair shops also accept credit cards and might be able to set you up on an affordable monthly payment plan instead of expecting a lump sum payment.
- Air Conditioning Compressor. The air conditioning compressor is the one responsible for pressurising the refrigerant and pumping it through your vehicle's A/C system. ...
- Camshaft. ...
- Car Keys. ...
- Cylinders. ...
- Diesel Particulate Filter. ...
- Engine. ...
- Flywheel & Clutch. ...
- Fuel Injectors.
If the cost of the repair is less than or around 50% of the vehicle's value, it's usually worth it. Reliability: Some brands are known for their long-lasting reliability, even beyond the 200k-mile mark.
- Renegotiate your loan terms. ...
- Refinance your car loan. ...
- Pay off your auto loan early. ...
- Sell your car. ...
- Consider voluntary repossession. ...
- Default on your car loan (not recommended)
Can I sell my car back to the dealership if I still owe?
Note: If you're selling a car with an active loan, you're still the one responsible for paying it off, so the remaining balance on the loan will likely be subtracted from the price the dealer offers you. So if you owe more than what the dealer offers, you'll need to pay the difference to the lienholder.
Car loans are secured debts, so the lender can repossess your vehicle if you stop making payments. A surrender is when you as the owner voluntarily gives the vehicle back to the lender when you file for insolvency proceedings.
Voluntary repossession can have a significant negative impact on your credit score. This record will stay on your credit report for seven years, potentially making it harder for you to get approved for new credit during this period.
Yes, many churches and faith-based organizations offer assistance to individuals struggling with car payments. What Churches Help With Car Payments? Organizations such as Lutheran Services, St. Vincent De Paul, and Catholic Charities are known for providing this type of support.
If you can't afford your car payments, you can give the vehicle back to your car loan lender. This option is called a "voluntary repossession." But just because you surrender the car doesn't mean that the creditor has forgiven the debt or that it has to.