No feeling is worse than having financial trouble. In the United States of America, nearly 20% of the residents have sub-par credit that is causing a rise in consumer debt burdens. So, if you are living in the U.S. and have bought a used or new car on credit but facing difficulty in affording monthly car payments then no need to panic. Here we have gathered a few things that you can do when you can’t afford car payments. Let’s have a look at these options.
1- Refinance the loan
In case of bad credit, you have to pay approximately 10-30% APR for your car. But if you have got a good credit score over the past few months, then you can get a better car payment deal by refinancing. Use a leading credit reporting agency like Equifax or TransUnion to analyze if there is any improvement in your credit score since the time you obtained your automobile loan. Compile the entire credit information and financial health to ask your issuing bank to refinance. This option will reduce your APR to help you afford your car payments.
2- Negotiate with your lender
Your lender can help you get out of your financial trouble. Do not hesitate to talk to your car lender and explain your current financial position. Your lender will never want to lose you as their customer so there are maximum chances of adjustment in your monthly car payments. They may extend your loan length that will ultimately decrease your monthly payments. Or they may allow you to pay lower payments for a shorter time period. Some lenders also allow the borrowers to skip one or two payments and then they place these payments at the end of the financing period.
3- Home equity credit
You can also escape from your bad financial position if you own a home. For that, you can obtain a loan from a financial institution by using your house as collateral. In case of home equity credit, the amount of interest will be much low because this type of loan is secured. Once you have got a loan from home equity, you can use it to pay your car payments until your financial position is improved. Be careful in opting for home equity credit as your home possession can be in danger if you fail to repay it.
4- Use your retirement or savings accounts
Though you may feel bad while using this option, but it is much better than losing your vehicle. You can easily withdraw some cash from your retirement or savings accounts to make the monthly car payments. Here it must be kept in mind that a penalty will be imposed on your taxes, but it will be worth than losing your car.
5- Sell your vehicle to buy a cheaper car
If you still can’t pay your car payments with the above-mentioned steps, then we suggest you sell your car and prefer purchasing a cheaper vehicle. This option will only work if your car’s equity is more than your outstanding car payments.