Having a vehicle can be a very important part of maintaining your daily life. You may need it to get to your job, carpool your kids, get to the store, doctor, church, etc.
But, owning a vehicle can be costly. Monthly payments could take up a significant portion of your income making it difficult to maintain other living expenses. It becomes easy to fall behind on your payments and be at risk of losing your transportation. It is estimated that 1 in 20 vehicle loans have fallen into delinquency at some point during the loan term.
If you have fallen behind on your car payments, there are some actions you can take.
Talk to Your Lender about Modifying Your Car Loan
Many lenders may be willing to make adjustments to your car loan if you have fallen onto temporary financial trouble. They want to keep your business and not go through the hassle and expense of repossession. As soon as you realize your financial difficulty, contact your lender to see what options they may offer. Many lenders offer the following options:
- Allow you to make lower payments or skip payments for a short period while adding the deferred amount onto the end of your loan
- Extend the duration of your loan with a lower monthly payment
- Lower your interest rates
Trade in Your Vehicle
Depending on the appraisal value of your car, it may be possible to trade your car in for one that has a lower monthly payment or interest rate. To get the most from your trade-in you should research your vehicle’s trade-in value to ensure negotiation of a fair price. You can get trade-in estimates on websites such as Edmunds.com and Carmax.com.
Sell Your Car
You may be able to sell your vehicle for enough to pay off your loan, depending on the size of your loan versus the value of your car. If you cannot sell the car for the amount of your loan, you will have to use your own funds to make up the difference in order to transfer the title to the new car owner. After selling your car, you may be able to get a loan on a vehicle of lesser value which should have lower payments.
File for Bankruptcy
As soon as you file bankruptcy, an automatic stay will go into effect stopping all collection actions against you, including repossession of a vehicle, for the duration of your case. Then depending on your financial situation and the type of bankruptcy you file, bankruptcy could help you with your car loan by doing one or more of the following:
- Freeing you from other debt so you can make your car payments more easily
- Stretching out the repayment period of your loan
- Reducing your car loan interest rate
- Limiting the debt you owe to the vehicle’s current appraisal value
- Allowing you to surrender the vehicle and walk away from the car loan with projection from the unpaid loan balance
Everyone’s financial situation is different, so it is best to contact an experienced bankruptcy attorney to see if bankruptcy is a good option for you. Brock & Stout’s attorneys have over 20 years of experience helping clients with their financial difficulties. Contact us for a free evaluation to see if we can help you.