Car payments getting out of control? How to retake the wheel on financing

Maybe you lost your job, bought too much car or got into a loan you just can’t afford anymore.

No matter why your car payments have become unaffordable, it’s important to know what to do. Moving fast can help you avoid missing payments or having your car repossessed. Ideally, you’ll be able to rework your car costs to better fit your budget.

Here’s what you can do to retake control of your car payment.

If you’re on the verge of missing a payment, contact your lender right away. They may be willing to cut you some slack, says Jeff Huang, sales supervisor at Westlake Financial Services, a national auto financing company based in Los Angeles.

“Communication is really critical. Talk to your lender, and they’ll likely want to work with you, especially if you’re a loyal customer,” says Huang. “They don’t want to take the car back.”

Explaining what’s preventing you from making payments might make your lender more sympathetic, Huang says. The lender may then allow “forbearance,” a period of time in which you can skip or make reduced payments.

Or, the lender may extend the number of months you’d make payments. This reduces the monthly payment, but in the long run, you’ll probably pay more in interest. However, it’s better than damaging your credit with a repossession.

Other possible solutions depend on your situation, so you’ll need to pull a few numbers:

If you owe less than the value of your car, you have positive equity and you’ll have more options, like downsizing or refinancing. If you owe more than your car is worth, you have negative equity, which can make it trickier to get out of an unaffordable loan.

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Work to find a long-term solution, and be realistic about how much you can afford.

If you have positive equity you can: 

If you have negative equity you can:

Determine your car’s value

How to build a budget

Calculate your total car costs

Sean Pyles is a staff writer at NerdWallet, a personal finance website. Email: spyles@nerdwallet.com.

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