Can't Afford Your Car Loan Anymore? Here Are Some Tips


What to do when you can't afford your car payment this month.

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There are any number of reasons a person might have trouble affording their car loan payments, and if you're wondering how to get out of a car loan, we have some bad news for you: it's not as simple as finding a loophole and calling the whole thing off. But there are ways and means to try to deal with the problem.

During the Covid-19 pandemic of the past year and a half, more and more people have found themselves needing help with their car payment plans. One doesn't usually plan for the risk of a natural disaster like this when calculating their car financing - something you can read about here - so they shouldn't be punished for needing help paying for their car payment. It's not as simple as 'don't buy stuff you can't afford' in this case.

Luckily, there are a few steps a person can take to lower their car payment - buyers won't be able to get out of their car finance agreement, though. But if you want to know what your options are if you can't afford your car payment, here are some tips. If you haven't even found the car you want to finance just yet, why not look at this buying guide?

Dont Buy Stuff You Cant Afford

Ways to Change Car Payment Plans

There are a number of methods one can try to change or lower their car payment plan when they can't afford a car but need one. These can be broken down into:

Lower Car Payment

Request a deferral

This is a stop-gap step. By directly contacting your lender, you can request that you get a reprieve from your monthly payments for a short time. This may be a month or two, depending on circumstances, but making no payments for 6 months or more would be an unreasonable expectation. This request might be met with firm denial, but most lenders should be willing to waive a payment or two, or at least allow you to pay less than the agreed-upon amount. This should have no overall impact on how much you pay since these installments will still need to be paid at the end of the policy

Refinance your car loan

This is a more impactful step. It is also very situational. If the value of your car is higher than the amount owed on it, you have what is called equity. With this, you can approach another financing institute and request that they buy out your current loan. They can do this for less than the final amount since they don't have to account for months or years' worth of interest. However, there will still be penalties incurred by cutting a loan short. After this, they will own the title to the car and you can negotiate a new loan agreement with them, usually at lower interest or less overall cost. Alternatively, they may offer an extended duration. This means that your monthly expenses would be lower, but it does increase the amount of interest you will end up paying. This is the only way you can technically get out of an agreement.

Refinance Your Car Loan

Sell your car

This is one of the more drastic approaches. If you don't think that simply deferring a payment or two, or even negotiating a new loan agreement would be enough to lower your fees to a manageable level, you can just sell your vehicle. If it is still worth a decent amount, you may find yourself with enough cash to pay off the remainder of your loan and still have money left over to buy something else, in which case you could look at used cars on sale for the lowest prices. Considering that you have struggled with payments before, deciding between new and used cars is a no brainer - still, this guide can help you. There will still be penalty fees of course. If you do choose to sell, remember that you can get more for doing so privately, but it takes longer and can be stressful. Alternatively, there are plenty of dealerships in the USA that will help you sell your car quickly.

When you end up buying a new car, consider going electric. Not only should you qualify for a no-emissions incentive discount, but the lower cost of running an electric car might make managing monthly payments easier. The Mini Cooper SE retailed for under $30k as new in 2021, while the Nissan Leaf starts at $36,500, which is on the higher side of the pricing spectrum. For more information on buying or leasing an electric vehicle, look here.

How to Lower Car Payment

There are not a lot of ways to actually lower your monthly payments. Naturally, the best thing to do is to choose cars with low monthly payments right from the start. That's not always an option, though, especially if you get a car loan with a bad credit rating.

As mentioned above, refinancing is one way to reduce your monthly payments. However, if your credit rating has improved since you initially took out the loan, you may be able to get a personal loan at a much lower interest rate with the express purpose of paying off the remainder of your car loan. If your rating is good enough, you should be able to cover the loan and penalty fees and still come out in the black.

While it may not be an option for everyone, and some people may advise against it, you could also borrow money from a friend or family member. In a sense, it can be like refinancing, as they could buy out the loan in its entirety and you could simply pay them back interest-free. You'd need to have a very solid relationship and they'd need to be very generous, though.

Lastly, you could try to renegotiate with your current lender, asking for an extension on your current policy. However, this is not the greatest plan. Yes, you will end up paying less per month, but you will be paying for longer, which can make planning for the future even more difficult. It will also cost you more in the long run, as there is more time for interest to impact the final figure.

A Few Things to Remember

All of this information can seem a bit overwhelming, but that doesn't mean you can't handle it. Around three-quarters of all Americans have some form of debt, so there is no need to feel ashamed. Keep a level head, and follow these steps on what to do if you can't make your car payment to get ahead of any problems:

  • Take a deep breath: Nobody does their best thinking when they are stressed out.
  • Contact your lender: This should be a conversation, and a good lender should know what options to suggest.
  • Know your finances: You have to know how much money is coming and going to plan. The more information you have, the better equipped you are to make a decision.
  • Consider the big picture: Don't take the first option just because it sounds good now. Think about the pros and cons of each choice in terms of your financial future.
  • Write things down: This not only helps with planning, but it is also important to get any agreements with your lender or anybody else in black and white.


Can I refinance my car loan?

In most cases, this should be an option for anybody who owns a car loan policy. You simply need to find another lender who is willing to take over payment on the car, and who will then offer you a better deal than the one you currently have. It may not be as easy as it sounds, but it should be possible.

How do I get out of car finance?

The only true way to quickly get out of your financing agreement with the lender is to pay off the balance of the loan. The best way to do this without some form of outside help is to sell your car. If you can make enough on the private market you may be able to pay what is owing.

How do I return a car I can’t afford?

If you find yourself missing car loan payments regularly, you may find yourself at risk of repossession. However, you can lessen the negative impact this will have on your credit score, you can explain the situation to the lender and offer to surrender your car voluntarily. You'll still take a hit, but future lenders may look favorably on it.

How can I lower my car payments?

There are a few options to consider. You can ask to skip a few months of payments by requesting a deferral while you get your finances in order or pay off other unexpected debts. Alternatively, you could ask for an extension on your current loan, which will lower monthly payments but extend the period. Finally, you can choose to refinance your car loan with another lender.

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