What to Do When You Are Behind on Car Payments
Falling behind on car payments is never a pleasant scenario. First of all, your car is a valuable asset in its own right ‐‐ and secondly, your credit can be badly harmed by financial delinquency. Last but not least, your car also likely represents your mobility, which in turn represents your ability to work and earn money. The combination of these factors means that losing your car can cause a quick financial downfall.
Thankfully, just because you are behind on payments doesn’t mean you have to lose your car. You have options at your disposal ‐‐ it is merely a matter of understanding them. Here are a few suggestions that we have for anyone who is currently behind on their car payments.
- 1. Keep Calm. Are you just a few days late? Great news: most auto lenders offer a grace period as long as 15 days. (Just don't abuse this privilege by using it regularly, or you are sure to find yourself wishing that the grace period also had a grace period!)
- 2. Understand Equity. Is your car worth more than you owe on your auto loan? In that case, congratulations! You have equity, and even if you fall behind on your payments you are still in relatively good shape. If, on the other hand, your car is worth less than your loan, then you do not have equity. This situation is often referred to as being "upside down."
- 3. Selling to your Dealership. If you have equity yet are behind on payments, then the best option at your disposal might just be to sell the car back to the dealership. You will still walk away with a profit ‐‐ and you will likely receive an offer to buy a more affordable car on very favorable terms. If you are upside down, however, then completing a sale is going to much more difficult…so pay close attention to point number four:
- 4. Communication is Key! Especially for those who are in serious trouble (i.e. upside down and behind on payments) communication is your most important line of defense. Calling, writing, or visiting your lender in order to explain the specifics of your financial situation will show an honest and proactive approach to your problems ‐‐ and this alone is usually sufficient to buy yourself a few extra months‐worth of time.
For more tips on financing college, reducing your debt, budgeting, and more, visit Madison Monroe and Associates online today!