When the car payment no longer fits, call before the account is late
Car payment too high? Your lender may move the due date, offer a payment plan or allow a short forbearance. Get the full terms in writing before you agree.
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A car payment too high for your budget is a common problem after a cut in hours, a rent increase or an insurance renewal. Ignoring the bill does not create breathing room. Calling the lender often does.
There is no universal auto-loan hardship program. The available options depend on the lender, your payment history and the contract. Still, the questions to ask are the same.
Call with three numbers in front of you
Before dialing, find:
- the next payment amount and due date;
- the amount you can pay now; and
- the date you expect normal income to resume, if the problem is temporary.
Use the customer-service number on the statement or the lender’s official website. Explain the change plainly: “My hours were reduced. I can pay $240 of the $465 due on Friday, and I expect normal hours next month. What payment-assistance options do you offer?”
Specific numbers make it easier to distinguish a useful plan from one that merely delays the same problem.
What the lender may offer when the car payment is too high
A due-date change can align the payment with payday. It helps when the issue is timing rather than the amount; our guide to budgeting a weekly paycheck shows how to match bills to paydays. Ask whether it applies to the current payment or only future ones.
A payment plan may split the missed amount across several months. Add the catch-up amount to the regular payment before agreeing. A $465 payment plus $120 for three months may still be impossible.
An extension or forbearance may let you pause one or more payments. Interest usually continues to accrue, and the skipped payments may be moved to the end of the loan. That increases the total cost and can extend the payoff date.
A refinance replaces the loan with a new one. A lower rate can help, but many refinances reduce the payment mainly by restarting the clock. Compare total remaining cost, not only the new monthly number. Our loan payment calculator shows both.
Get any arrangement in writing. Confirm the new due dates, fees, interest treatment and what the lender will report to the credit bureaus.
Know the car’s value before you trade it
If the payment will not fit even after income recovers, selling the car may be cleaner than repeatedly asking for extensions. First compare two numbers:
- Ask the lender for the payoff amount, which may differ from the balance on the last statement.
- Get realistic purchase offers from more than one dealer or car-buying service, and check private-sale values.
If the car is worth $16,000 and the payoff is $13,500, the $2,500 difference can help buy a cheaper replacement. If the payoff is $19,000, you are $3,000 “upside down.” Rolling that shortage into another auto loan makes the next car more expensive before you drive it home.
Do not wait for repossession
Repossession rules vary by state and contract. In some places, a lender can take a vehicle after a missed payment without first going to court. The car may be sold, and you can still owe a deficiency balance—the gap between the sale proceeds and what you owed—plus repossession costs.
Voluntarily returning the car does not automatically erase that balance or protect your credit. If you are considering it, ask the lender for the consequences in writing and speak with a local legal-aid organization about your state’s rules.
Also watch for companies that promise to “stop repossession” in exchange for an upfront fee. Deal directly with the lender or servicer. Nobody outside that relationship can guarantee a loan modification.
A short-term problem needs a short-term fix
One skipped payment may be reasonable if a confirmed return-to-work date makes the regular payment affordable again. It is less useful when the payment has been too high for six months.
If the budget is permanently short, compare keeping the car, refinancing and selling it on the same page. Include insurance, fuel and repairs—not just the loan. The best answer is the one that lowers the total cost of transportation without putting your job at risk.
Sources
About this article. This is general information, not personal financial advice. Rates, fees and rules can change after publication, so confirm current terms with the lender. Read our editorial standardsand advertising disclosure.
