When money gets tight, you may find you are unable to pay all your bills each month. For some, you may be able to skip a payment or send a smaller amount without immediate consequences. You may pay late fees or other charges, and the delinquency may show up on your credit rating. However, these do not have the life-changing effect of a missed car payment.
The problem with missing a car payment is that you could lose your vehicle. Many car loan contracts stipulate that even one late payment can begin the repossession process. Not many people can function without a vehicle, so if you need yours to get to your Michigan job and other obligations, you may want to explore your alternatives.
Don’t wait to take action
Your first option is to communicate with your lender. Many times, lenders are willing to work with a borrower who has fallen on hard times. Your lender may allow you to defer payments by adding them to the end of your loan. This option is a temporary fix. The interest and other fees continue to accumulate, and it doesn’t solve the problem if the car payment is just too much for you.
On the other hand, you may be able to refinance the loan for a lower monthly rate. You must have good credit, and you will likely have to shop around for a lender who will work with you. You may also consider any of these options:
- Sell the car and pay off your loan. The drawbacks to this are that you may not get enough to pay the full amount, and you will still be without a vehicle.
- Find someone to take over your loan. Again, this means you will be without a car, and not all lenders allow for assumed loans.
- Do a voluntary repossession, which is when you return the vehicle to the lender to sell at auction. Auctions do not always bring in the full amount of the loan, so you may still owe the lender the balance.
- Allow the lender to repossess your vehicle. This involves expense for the lender, who may add that cost to your debt.
You also have the option of filing for bankruptcy. Taking this step places an automatic stay on any repossession actions your lender has taken, which means you may be able to keep the vehicle. You may also find that it provides relief from the debt that is creating such stress and turmoil in your life.