Are you struggling with your finances and finding that your car payment is too high and you are struggling with cash? The editorial team from Short Term Loans Network is committed to helping borrowers navigate the challenges of personal finance, consumer based loans and debt reduction tips for 2015!
Is Your Car payment too high
George and Pauline (not their real names) emailed me with a question about getting out from under a high car payment. They are paying $721/month on one vehicle! They owe $20,000 on a vehicle worth about $11,000 and have three years of high payments left.
Ouch! Unfortunately, car payments the size of our parent’s mortgages are not uncommon these days as vehicles get more expensive, car loans get longer, and financing become easier.
What can George and Pauline do? But here is a quick summary of options for consumers when their car payment is too high:
• Refinance the vehicle: Go to BankRate.com or another car or auto lending website for a quote.
• Work things out with the lender: Talk to the current lender to try to arrange something that will lower your payments. The downside is you may be stuck with the car even longer and get in deeper with a longer loan. If you go this route, be polite but persistent.
• Turn in the keys. With a voluntary repo, you give back the car. They will sell it at auction, probably get a lot less than a private sale, and you will be assessed a deficiency for the difference.
• File for bankruptcy. Under the old law, you could work out an arrangement to pay off the car at its current value, rather than what you currently owe on it. Under the new law, though, you will likely have to pay off the entire debt if you have owned the car less than 2 years and 4 months.
• Sell the car and pay off the difference with an unsecured loan like a balance transfer from your credit card, loan from a relative etc. This may not always be the most attractive option, but sometimes it can save you from a repossession. Be careful, though, about just continuing to dig that hole deeper. (You can run a what-if scenario at CNN Money and then create a rapid repayment plan for paying back that debt.) Again, with limited borrowing options it will be tough here.
Of course, the best advice is to be very, very cautious when buying a new car. Buying the maximum you can afford can be risky!