Problems Arising from Inability to Pay Car Installments
Inability to pay car installments can lead to multiple issues. Late or missed payments will be reported to credit bureaus, significantly affecting your credit report. The most important factor in your credit report is payment history, so these negative marks will have a substantial impact. Every month that a payment is delayed increases the negative effect on the credit report.
Dealing with the Lender
Being prepared and making it clear to the lender that you are working on resolving the issue is the best way to find a solution. First, look at your situation in the short term. When is the next due date for the installment, and how much can you pay, if possible? The lender may allow you to skip one month for a fee ranging from $25 to $50 added to the total installment amount. Although this is not ideal, this arrangement can buy time to implement a long-term plan.
Refinancing Options
Refinancing your loan essentially means taking out a new loan and using that money to pay off the old loan. If you have a good credit history – and this may be the case if you have acted quickly and avoided late payments – you may be able to secure a lower interest rate. However, the most effective way to reduce installments is to extend the loan term. For example, if you have 36 months remaining on your loan, you could refinance it for 48 months. This method usually increases the interest rate, but you will end up with significantly lower monthly payments.
Selling the Car Yourself vs. Trading It In
For a potentially greater profit, try selling the car yourself. Kelley Blue Book reports that you can get about 15% to 25% more than what you would receive as a trade-in. For example, if a dealer offers $10,000, you could expect to receive $11,500 to $12,500 by selling the car yourself.
Getting Out of a Lease
If you have leased a car and are behind on payments, it presents a completely different challenge, but the goal is the same: to get out of debt without damaging your credit report. A lease transfer may be an option, but depending on how quickly you reach an agreement, you might have to accept some losses on the money you paid upfront.
Buying an Inexpensive Car
Once you sell your current car, consider options that are more budget-friendly. Check your local public transportation system to see if it fits your lifestyle and the actual necessity of owning a car. You might be able to go without a car for a few months while saving money and recovering from your financial difficulties. If a car is essential, buy an inexpensive one and try to pay for it in full. By shopping online, you can find a reliable used car for $2,000 or $3,000. If you need to borrow money to purchase a car, try to pay as much as possible upfront to keep the installments low so that you don’t face the same issue again, as long as you are able to do so.
Source: https://www.thebalancemoney.com/i-can-t-afford-my-payment-what-should-i-do-2385864
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