What Can You Do if Your Car Payments are Too High?
You have a car loan, as most people do. It was great at first…and then something changed. You may have been hit with a massive repair bill for your furnace at home, or your preteen son needs braces. You’ve been laid off your long-time career position just before a promotion you expected. You fell ill and can’t earn as much as you used to. Suddenly, you need to buckle down on your finances and your car payments are too high. What can you do about it? It’s a horrible place to be, but don’t despair – you have options.
Here are a few ideas if your car payments are too high.
Ask the lender to skip a payment. Most banks and lending institutions have a clause in their financing contract. It allows the borrower to skip a payment every so often, such as once per year. In some cases, the borrower still needs to pay the portion of the payment that is interest, in other cases the payment is skipped altogether. By skipping a payment, you may be able to get caught up on other financial strains. Be aware that the skipped payment is simply deferred to the end of the loan, and it does not disappear.
Refinance at a lower interest rate. It could be that your credit is in a better state than when you bought your car. After a period of car ownership with consistent repayment, you may be eligible for a lower interest rate. You’ll need to re-apply for financing through the lender to get a lower rate. The lower interest rate can help reduce your monthly commitment if your car payments are too high.
Refinance for a longer term. Did you select one of the shorter financing terms available, thinking you’d have no problem making the payments? If you’re struggling, you can apply to refinance your loan over a longer term. That stretches the payments out for a longer time frame but drops the monthly charges, sometimes considerably.
Trade in your car on a less expensive model. Maybe you have a great interest rate and a decent term, but your car is too expensive. You can often trade in a car that you have equity in for a less expensive model. That reduced the amount of money you need to finance altogether, and can make your payments manageable.
Take a break from car ownership. If you’re out of options otherwise, you may want to take a break from owning a car. You aren’t giving up – you’re fighting to wisely manage your finances. You can sell it privately or you can sell it to a dealership like CarUP Kansas City. We’ll buy your car from you, helping you lower your financial commitments. And when it comes time for you to once again buy a car, we’ll be here to help you with that as well. If you need advice on how to handle it if your car payments are too high, stop in or give us a call. Our car financing experts will guide you through your concerns, helping you regain a solid footing with your car loan.