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What to Do When You Can’t Afford Loan Payments?

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If you ever get into a situation where you can’t afford loan payments, just don’t panic. It’s just a situation, and you can get out of it. You have many options; all you have to do is figure out what works best for you and your current financial situation. 

What happens when you miss a payment? 

Things can get out of hand when you miss out on your monthly loan payments. Your credit score goes down every time you miss a payment. Your car can be taken away if you can’t get caught up on payments. Worse, you might still owe money on your old car even though you don’t have it anymore. The effects can last for years, making it hard to borrow money again and raising the interest rate on any loans you get. It can hurt your financial reputation.

What is the average monthly car loan payment in the US?

What to do when you can’t afford loan payments? 

Let your lender know of your situation 

Talk to your lender about your situation. Tell them you might be unable to carry on with timely loan payments. Since taking back a car with late payments take the most time and effort, many lenders are willing to work with borrowers to get their payments in order. The earlier you talk to your lender, the more options they may be able to give you. You can try the following: 

You can request a change in the due date

Ask your lender to change when your next payment is due. If you can’t make it, inform them of the delay. This can help you avoid late fees. 

You could alter your payment plan

You can ask your lender to change your current payment plan into something that works for you, so you don’t lose the loan. You can extend your loan term so that you get affordable monthly payments. 

Be aware that some of these options might cost you money, or you might need to pay extra interest than the current. Ask your lender about the possible consequences of these changes, and get updates in writing, so there are no misunderstandings in the future. 

You can request a deferral 

If you’re having trouble with timely payments and a small change won’t help, you can ask your lender to delay your car payment. If approved, you can skip several payments without being charged extra or getting in trouble. 

Each auto lender has rules and requirements when putting off payments. Some let you put off the full payment, while others make you keep paying interest. Some companies limit how often you can ask for a delay, while others won’t let you ask for a delay if you’re already behind on your bills. 

Each lender also has different rules about how to fill out an application. If your loan agreement lets you put off payments, you might be able to skip a payment from your online account. In other cases, you might have to send a letter explaining why you need the deferral and giving details about your finances, such as your income and credit score. 

You can manage the next payments if your request for a deferral is approved. But that doesn’t mean you’ll never have to pay again. Your lender will just add the payments you didn’t make to the end of your loan. This process is also called loan extension. 

Make use of home equity 

If you own a home, you may have home equity. Lenders offer home equity loans, a second mortgage where you use your home as collateral. Most of the time, you can borrow up to 80% of the value of your home. If you use home equity, you only have to make one monthly payment, and you can deduct the interest you pay on the loan if you itemize your tax deductions.  

Recently very few itemized their taxes since the standard deductions have gone up. Most secured loans have lower interest rates than unsecured loans, so you might be able to pay less for your car this way. But you can lose your car if you can’t pay a conventional car loan. If you can’t pay back a loan against the value of your home, you could lose it. 

Are your auto loan payments getting unmanageable? That’s your cue for refinancing. With Way.com, you get the best refinance options available to you. Use our refinance loan calculator , compare the loan rates, prequalify and save up to $1850 a year on your refinanced auto loan. 

Get help from your friends and family 

This may or may not be a smart idea for you, depending on how close you are to your friends and family and how much money they have. But if things are really bad and you can’t pay for your car payment, it might be better to talk to your close circle. Remember that help from friends and family doesn’t always have to be in the form of money. 

Even though it would be great to have someone who could pay off your loan immediately, it’s not everyone’s story. Be open if you opt to ask for help. Your friends and family may help you sell your car or know someone who could help you financially. 

Try refinancing 

Refinancing can help you to lower your monthly payment by lowering your interest rate or changing the loan terms. But your credit score still can impact your interest rates. Even after refinancing, make sure you pay on time. You will hurt your finances if you don’t make payments on time. 

Changing the terms of the loan can help you get cash immediately, but it will cost you. You’ll have to pay on loan for a longer time, which means that when the loan is paid off, you’ll have paid more for the car. But that can still be better than not paying and taking the car away. 

Sell your vehicle 

If you’ve been having trouble making your car payment for more than a couple of months, you might be in trouble. It’s high time for you to have an honest conversation with yourself about your finances. If it’s going downhill, you might be better off getting rid of the car. You could trade it in for something cheaper or sell it and buy a used car, so you don’t have to make a car payment.  

If the value of your car is more than what you owe, you have “equity” and could sell it to pay off your debt. Since private buyers usually pay the most, you could give yourself time to find one by asking your lender for a deferral. 

Or, if you’re in a hurry and want an easy way out, you could work with a dealership or a site like Carvana or Carmax. This is usually the easiest way to go when you don’t have the title. When you have equity in your car, selling it is one of the best things you can do because: 

  • You could get a few thousand dollars, which could help you buy a cheaper car 
  • You’ll pay off the loan on time, which won’t hurt your credit score. 

Selling your car won’t help if you’re “upside down” on your loan. It means you owe more than the car is worth. One possible plan is to sell the car for as much as possible and then get a personal loan to pay off the rest of the debt. Even though you’ll still have to pay back the personal loan, the payments will probably be easier to handle than those on your auto loan. 

Surrender your car voluntarily 

You could consider surrendering your car voluntarily to the lender as a last resort. Even though a voluntary surrender will still hurt your credit score, it will probably be less embarrassing and cost less than a forced repossession.  

Since you are taking the initiative and responsibility for your debt, future lenders may consider a voluntary surrender a little more favorably than an involuntary one. Know that a voluntary surrender will stay on your credit report for seven years.  

You’ll still be responsible for paying the deficiency balance, the difference between what you owed and what the lender got for your car at auction, plus any other fees. If you can’t pay this balance, your debt will likely be sent to a collection agency. 


When you can’t afford loan payments, look at your finances and figure out what to do. If you don’t deal with it right away, it will hurt your finances in a big way. Once you know the problem, you can look at your options. You can buy cars in the future, but bad credit history stays forever. 

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How do you get out of a car payment I can’t afford? 

Try talking to your lender to see if they will change your loan. Lenders don’t like making changes to existing loans, and they don’t like taking back cars either. Make your case for why you need a change if you want to keep making payments. Depending on your situation and credit score, you might be able to refinance your loan and save money. Before you do anything, you should look into the costs of refinancing and read the terms of your loan agreement. 

Can I be imprisoned for not paying my car finance? 

No. The person who didn’t repay the loan won’t go to jail. If you don’t pay back a loan, that’s a civil charge, and you could also be charged with a crime. So, you won’t be imprisoned for not paying your car finance. 

Can I return a financed car if I can’t afford it? 

If you can’t pay your car loan, you can give the car back to the company that gave you the loan. But just because you give up the car doesn’t mean the creditor has to or has to forgive the debt. 

What happens if you are three months behind on a car payment? 

If you miss two or three payments in a row, your car may be repossessed, which hurts your credit score. And some lenders have implemented technology that can turn off cars remotely after just one late payment. If you miss a payment, you have options, and your lender will probably work with you to find a solution. 

What can I do if my car payment is too high? 

You could refinance your current loan, replace it with one that costs less or ask your lender for help with your payments. 

Way.com, your Auto Super App, offers the best affordable city and airport parking, the cheapest auto insurance and auto refinance, reliable car wash and EV charging near you, cashback on gas, and much more. Sign up and save up to $3000 on your yearly car expenses.  

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