According to the statistics offered by the Federal Reserve Bank of St. Louis, the third quarter of 2013 saw a decline in the percentages of balances in severe delinquency of auto loans. While this suggests that more people are repaying their loans and doing it on time, there are still many St. Louisans who struggle to make car payments.
If you are one of these people, find out what options you have if you can no longer afford to pay for your car. Listed below are some of the things you can do if that time comes.
Have your auto loan modified
If you are having financial problems and suspect that you might miss a payment, contact your lender immediately. Don’t wait until after you miss the payment to talk to your lender. Explain your situation and ask if your loan can be modified so you can make payments. Lenders that are amenable to modifying auto loans may lower your payments for a certain period of time or allow you to skip several payments and just add the deferred cost to the end of the loan.
Get a less expensive car from the dealer
If you can no longer make payments on your current car, consider trading it in for a cheaper one. Ask your dealer if this option is possible. There are some dealers that allow this in order to keep customers. Unfortunately, with this option, car depreciation is a disadvantage. If your car depreciates quickly and you now owe more than the vehicle is worth, you will be paying the difference out of pocket.
Refinance your auto loan
If your original loan is proving to be a burden, refinance it. This option is most ideal if interest rates have gone down since you purchased the vehicle and if your credit has improved since then. You can make your car payments more manageable with refinancing because you can get a lower rate, especially if your credit is strong. You can further reduce your monthly payments by extending the loan, though this move will increase your overall loan cost. Note that with refinancing, you will need to find a new lender.
Sell your car
This is considered by many as one of the best options for people who can no longer afford their monthly payments. Sell the vehicle yourself. Because there is no middleman, you get more from the transaction. In the event your car is sold for a price lower than what you owe your lender, you should take out a personal loan to cover the difference. The personal loan you should seek is one with a good interest rate, and you are likely to find this at a bank or credit union.
Let someone else take over the payments
You would be surprised to know that someone else can assume the auto loan and take over your repayment responsibility. Before you find this person though, make sure the loan is the assumable kind. Ask your lender if you can pass the loan obligation to another buyer. If you are allowed to do so, it is possible that the lender will demand that the car buyer meet credit and income requirements before he or she assumes the loan.