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Auto Loan Debt Relief: What You Should Know

Updated: Nov 24, 2022

If you are unable to keep up with auto loan debt or are having trouble making your monthly payments, you may want to consider your financial options. Non-payment on an auto loan can lead to loan default and repossession, leaving a lasting impact on your credit. Fortunately, if you are seeking auto loan debt relief, or need to lower your car payments with bad credit, there are a few options that could help you meet the terms of your loan.

1. Contact Your Lender

If you have missed payments or are worried about falling behind you should contact your lender as soon as possible. The last thing a lender wants is for you to default on your loan, so there are several ways in which they can work with you to continue your payments. You can change the date of your payment, negotiate a payment plan or even get a hardship deferral.

How to Negotiate a Payment Plan

Many auto lenders will negotiate a payment plan if you are falling behind on your monthly auto payments. This can help you catch up on the loan and address missed payments. However, once your agreed term ends you will have to begin making payments again and you may be required to make your monthly payment in addition to a portion of the amount that is unpaid from previous months. In most cases, interest is accrued daily and the amount you pay in interest between payments may change after implementing a payment plan with your lender.

Learn How to Get Your Credit Score & History

How to Negotiate a Payoff

If you want to avoid a monthly payment altogether you may be able to negotiate a payoff with the auto lender. In other words, you pay a lump sum of an amount less than you owe and the bank considers the loan terminated. While negotiating a payoff it is important to continue paying your existing care payment if possible. Delinquent payments will continue to adversely affect your credit. Before you contact your lender to request a payoff be sure to know exactly how much you owe and what you can afford to pay. Most lenders will provide, online or over the phone, a "10-day payoff" which represents the amount it would take to pay off the loan if it were done so within 10 days.

The downside is while this can save money and relieve debt a negotiated payoff will still negatively impact your credit. Although you have paid an amount agreed upon with the lender you still have failed to meet the terms of your original contract and pay the loan. Future lenders will see this reflected on your credit when you apply for financing.

Request an Extension or Deferral

Some auto lenders offer "hardship programs." If you can demonstrate that you are having financial issues or that your circumstances have changed the lender may defer your payments. . An extension may change the due date of your loan amount and give you more time to pay. While a differed loan will suspend your monthly payment obligations for a predetermined time period. However, it is important to note that interest rates will continue to accrue during this period, and you may pay more in interest in the long run. A loan extension or deferral may be reflected on your credit history.

2. Refinance Your Loan

Refinancing your auto loan can help you lower payments and interest rates or pay off debt sooner. Refinancing a vehicle can be difficult with bad credit and often has upfront fees associated. If available interest rates or your credit has improved over the course of your loan, lenders may revise the terms of the loan to lower your monthly auto payment. You can speak directly to your lender or see your options through services like Super Money.

Lower your monthly car payment with Supermoney

3. Sell or Trade Your Car

One way to lower your auto debt is to sell your vehicle or trade it for a new one. Selling privately will likely fetch you a better price but it is a longer, less reliable process. Trading your vehicle to lower payments is likely only possible if you have decent credit, and equity in your car, in other words, the car is worth more than you owe to the lender. If you trade in a vehicle with negative equity (value is less than you owe) then this would certainly raise your payments as you have to pay for the new vehicle in addition to the negative equity that will be "rolled" into your new loan. For example, if your vehicle is worth $6000 for trade but you owe $8000, the remaining $2000 will be added to the principle of the next loan.

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Loan Default & Repossession

Continued non-payment of an auto loan can lead to your loan going into "default". Loan default is a failure to meet the legal obligations of your loan terms and can have a significant impact on your credit score. It is important to avoid your auto loan going into default if at all possible. Shortly after default, your lender will likely attempt to repossess your vehicle, meaning they will send someone to obtain the vehicle as their rightful property. Since you did not adhere to the terms of the purchase the vehicle is still the property of the lender.

If you are facing auto repossession you can learn more here.

If you would like more peace of mind when purchasing a vehicle. you can get an online auto loan with bad credit by applying to a subprime lender. Subprime lenders specialize in lending to borrowers with bad credit, and many of them offer online approval. if you need a loan quickly and have bad credit, an online lender may be your best option. Compare offers online to get started. Once you're approved, you'll be able to shop for a new car with confidence, knowing that you have the financing you need in place

Shop Auto Loans Online: Bad Credit, Special Finance, No Credit, Bankruptcy, No Money Down, Repossession.

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