What To Do When You’re Behind on Auto Loan Payments
Out of all the existing financial responsibilities, being up-to-date with your auto loan payments probably stands as one of the most important.
Why? Because any late payment will eventually have heavy repercussions on your credit report. Not only will you be hurting your overall scores, but you’ll also be limiting your ability to get any other type of loan in the future.
Nonetheless, that doesn’t mean that getting yourself into a situation in which you’re unable to is impossible. Neither does it mean that it’s something rare to find.
The Federal Reserve Bank of New York reported in 2019 that over 7 million Americans were late on their payments. So that’s something to think about.
In other words, if you happen to find yourself struggling with your auto payments, do not worry. You’re not alone. Furthermore, there are several actions you can take to fix your situation. In this article, we’ll go over some of them.
Take a deep breath, and relax
As critical as paying your bills to maintain financial stability, your utmost priority should always be looking out for your well-being. So yes, increased financial stress can indeed affect your well-being in the long run.
For those same reasons, your first course of action should be to pause everything. Breathe. Then relax. Dedicate some time for yourself as you need it.
Once that is said and done, give a deep thought to your current needs and future goals, as you’ll need them for the next step.
Get some perspective regarding your situation, act upon it
The way things are right now, it is very likely that your finances need some significant adjustments. The thing is, you’ve got to figure out which kind of adjustments are required in the first place.
Make a budget, one that tracks both your income and your expenses. This will give you a complete picture of your current financial situation. Now, identify which costs you can cut back on, allowing you to redirect that money towards your auto loan payment.
After the fact, now you’ve got to figure out a way to pay off the remainder of your loan consistently.
Our recommendation: make a spending plan.
By developing a spending plan for the foreseeable future and following it as closely as possible, you’ll have an easier time trying to stick to your goals. Likewise, you’ll find an easier time avoiding any potential sidetracks, such as any unneeded purchases done right on the spot.
Of course, the plan should consider the rest of your living expenses as important as your auto loan payments. This includes monthly rent, groceries, gas refills, among other things considered essential.
Do try and look for opportunities to reduce the amount of money being spent on those same expenses. Assuming there’s an opportunity for it, it’ll be beneficial for getting you back on track.
Call your loan provider, consider alternative payment options
Lucky for you, most loan providers are just looking for the payment period to be over, without any repercussions for either side. Same as you.
This means that your lender will very likely be willing to work with you to develop an alternative payment plan. Best case scenario, the new plan will be just flexible enough to help you get back on track right away.
For instance, you could ask for:
- A loan forbearance or, in other words, a pause period. This will allow you to take a short break from having to deliver payments. You can use this time to save up some money for whenever you have to return to your monthly payments.
- A repayment plan. Most of the time, this comes in the form of paying smaller amounts each month, only having to pay a bigger total in return. As bad as that might sound right now, this opportunity will be fixing your short-term issues, with more than enough time to compensate for any long-term ones.
- A change of payment date. In doing so, you might get the opportunity of separating your auto payments date to one that’s farther away from the rest of your essential expenses, helping you keep track of them way better than before.
Do keep in mind two things. First, each option has its pros and cons, so it’s worth doing some minor research to determine which one suits your needs the best.
Second, regardless of how empathetic your lender might be, remember that there’s still the possibility of an auto repossession. Sometimes, starting as soon as the first missed payment. So to avoid that scenario, try to get a hold of your lender as quickly as possible.
Preferably, from the very moment, you realize you’re having these types of financial difficulties.
If everything else fails, consider whether your car is still affordable
In some cases, regardless of how much you tried, your case might end up in you realizing your original purchase is no longer affordable.
Maybe you’ve played all your cards, and yet you still can’t get back on track. Alternatively, perhaps you’ve delayed your payments to the point that your car is no longer valued at the same price you’re paying in total.
If that were to be the case, it might be best for you to consider exchanging your vehicle for one that’s currently more affordable to you. Then, you can either sell your current or even trade it for another one. But, of course, that being entirely up to you.
As you might have figured out already, this mostly comes as a last resort. However, if you reach this point, don’t see it as something terrible. In the end, you’ll be able to fix your financial situation, as well as get a new car out of it.
This almost comes up as a win-win scenario.
For financial assistance and more, try House of Cars
At House of Cars Medicine Hat, we pride ourselves in our ability to let all customers find their dream car.
Likewise, we pride ourselves on making sure that they remain together for the long run.
For those same reasons, we accept all types of credit. Even bad credit!
At House of Cars, we offer all kinds of financial assistance to make sure you have no issue when it comes to becoming a car owner.