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    What To Do If You Can’t Make Your Monthly Car Payment?

    Failing to pay monthly auto installments on time is a problem that many borrowers face during the life of their loans.

    Temporary financial instability can happen to the best of us, and there can be many reasons for this.

    When you miss paying the monthly installments of your car loan, the results depend largely on the terms of the contract.

    • If you miss payment for a month or more, you’ll start receiving frequent reminders.
    • If the delinquency continues, the loan account will be marked ‘default’ or ‘NPA’.
    • There will be a negative impact on your credit score.
    • The lender will repossess your car.

    Missing your car loan payments can have extreme outcomes.

    Fortunately, there are many options that can help you manage your funds and reorganize debt better.

    Amend Your Loan

    Being diligent helps to ensure that you have the most choices.

    Review your budget and speak with the lender directly given many lenders don’t want to get to the point of repossession.

    It is in the lender’s best interest to maintain a relationship; hence most agree to adjust loan terms.

    You can request an increase in your repayment period, which will reduce your monthly payment.

    You can also request forbearance whereby the lender will let you skip payments for a month or two.

    However, in all these scenarios, interest will keep accruing.

    Refinance Your Loan

    Refinancing is another choice that can work in your favor. Refinancing provides a means to stay current without making additional payments.

    It is a way of lowering payments after you have paid a large portion of the loan.

    Explore deals with your existing lender and compare the prices and conditions that other lenders might offer.

    Approval depends on many factors, including credit history, past payment record, and a valid explanation of why you are now behind on payments.

    Someone Else Assuming Your Loan

    If your existing car loan has a low APR and monthly interest rate, a good lease, or ensures a stable resale value, an interested buyer might be willing to take over the payments.

    However, not every lease or car loan is assumable.

    If eligible, you can also check on websites like

    Even if eligible requirements are satisfied, the new buyer must meet the credit and income requirements before the lender will proceed.

    The policies for auto loan assumption are at the discretion of the lender and vary on a case-by-case basis.

    Trade in Your Car

    You can lower the monthly sum by trading in for a cheaper car if you have positive equity on the existing loan.

    Positive equity means that your outstanding balance is lesser than the car’s value.

    For instance, if you owe $5,000 on the current loan and the vehicle is worth $8,000, you will have $3,000 to be used on another vehicle as a down payment if accepted as a trade-in.

    To make the most out of the trade-in, determine the value of your vehicle (also called appraisal) from a dealer or using services like CarMax.

    If All Else Fails

    If none of the previous options work, there are some more serious options to consider.

    Reconsider your budget to see if you can make some adjustments.

    If not, here are some other things to do:

    • Sell The Car - It's safer to sell the car if you don't believe you can afford it rather than have it repossessed. If you’re not upside down on the loan, do everything you can to sell off the car at the best price and use the funds to clear off the debts. Note that if you sell the vehicle at a lower price than what you owe, you might have to fund the remainder from your pocket.
    • Submit The Car’s Keys – Also known as voluntary repossession, this allows you to surrender the vehicle to the lender. This is not a great option, but it keeps the vehicle from being repossessed at a time or location that you don’t intend. Bear in mind that the remainder of the debt, which varies from what you owe and what your car is being sold at, needs to be paid from your pocket. Voluntary repossessions are also marked as negative in your credit report.
    • Let The Lender Repossess The Vehicle – The lender can and will take possession for the vehicle if you miss payments for an extended period. Repossession rules vary by states, and some states allow lenders to take over the vehicle as soon as you miss payment. Some states are more lenient, but either way, a repossession will put a substantial dent in your credit score. You might also be asked to pay the deficiency balance, if any.
    • File A Bankruptcy – This is the last resort. However, it isn’t easy to eliminate debt by filing bankruptcy. Approval depends on the judge and you’ll have to prove financial hardships and payments will force you (and dependents) to compromise on lifestyle. Furthermore, this requires extra funds for a bankruptcy lawyer, fees, and other expenses.


    The only thing you must do when you are behind your loan payments is to contact your lender.

    Your lender can help devise the right solution for your needs.

    For instance, if you have an existing loan of $20,000 at 11.9% for 36 months, you’ll need to pay around $663 every month.

    Let’s say you need $12,000 to settle this debt and get a refinance offer at 8.5% for 48 months.

    Your new monthly payments will be $296 but will also cost a bit extra by the end of the term.

    This way you can avoid repossession and manage the debts without compromising on your lifestyle.