Can you save your car? What to do if you are behind in your car loan

Anytime you get behind in your loans the most important tool is your ability to communicate with your lender. It is in the car lenders best interest to work with you and most of them – but you have to start talking. Your car – as well as you house are secured debts and it is most important that you pay them off first. You are actually going to lose something if you cannot work it out with your car lender – not so your credit cards. In fact the most important debt to get peace with  is probably your car.

If you are behind on your car loan get on the horn and blow! Give the lender a phone call! Don’t be aggressive or whiny but just explain that you have come through some difficult times and you are having a hard time paying your loan, but you want to. One of the first options that may come to you is resetting the date of the loan. The lender may agree to bump up the day that your loan is due -if it is due on the 15th maybe they will bump it up to the 30th so that you can have a little leeway to get some more money in.  Sometimes lenders will reset loans several times a year, and that can help you avoid late fees. (This can apply to any lender, it never hurts to ask.)


If you cannot work your problems out with a new loan you may need to refinance. This means you are taking out a new loan, with new interest rates, payments and fees involves – to your advantage of course. Always be on the look out for opportunities to refinance, sometimes you credit union have better rates.

Similar to a forbearance is a deferment or extension of the loan – also called holiday payments.  Say you are 2 payments behind – the lender might agree to allow them to go to the end of your payment.

Of course you might have to sell your car – and the trick will be to do so before repossession takes place. You will still have to settle up with the car lender afterwards, but maybe that will put money into your pocket and put you in a place where you can better pay off your debt and get ahead financially. You may be able to afford a cheaper car with the money you get and pay back the lender.


Deficiency Balance – After repossession occurs, the car is usually sold at auction. The proceeds from the sale of the auto are applied to the outstanding balance of the loan; and any amount left unpaid is termed the deficiency balance. Lenders will usually expect payment on the deficiency balance and may be willing to negotiate a monthly payment arrangement on this amount.  This can be a bitter pill indeed: paying on a car that you do not owe. However, if the car is not owned than it is no longer secured and it is up to the lender how far they want to take the collection process.

Most people are proud of their cars, and even if they are not they are reliant on them. Losing your car is not the worse thing that can happen, but it rarely is fun.  Before you even purchase a car you should shop around and see what you can afford and see what is the best option. If you get behind – or think that you are going to – get on the phone and start talking – communicate and that is your best bet.



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