Jennifer Moore
Sometimes, despite our best efforts, we can find ourselves behind financially. It might start slow. One month you’re doing just fine, and the next month, you are staring at your bank account balance, wondering how you’re going to pay all of your bills. And sometimes, the decline starts much faster. Perhaps you have lost your job or you had to pay for an unexpected medical bill. Whichever way it happens, getting behind on your bills, especially your car payments, can be frustrating and worrisome, to say the least.
It’s important to understand that many drivers face financial challenges. So trust us. You’re not alone. And in this article, we’ll share what you should do if you find yourself struggling with your car payments.
Step 1: Assess Your Financial Situation
If you are feeling financially pinched, don’t panic. Start by assessing your financial situation to see how things got out of balance. The best way to do this is by reviewing your income, expenses, and debt obligations. And, using a proven budgeting methodology can help.
One approach that we often recommend to our customers is the 50/30/20 budgeting methodology. In this approach, 50% of your net income goes to your needs, 30% goes to your savings and retirement, and 20% goes to your wants.
As you review your financial situation, if you find yourself spending more than 20% on your wants, or over 50% on your needs, you might need to do some budget shifting.
Step 2: Contact Your Lender Immediately
Once you have reviewed your budget and understand your situation more fully, you’ll need to contact your lender. Trust us on this. Do not let an unpaid balance fester. When you communicate early with your lender, they’ll be more likely to work with you on a solution.
Potential lender solutions include things like:
- Defer your payment: In this case, your lender may put a temporary pause on your payments and add them to the end of your term loan. You don’t necessarily get out of the payment entirely, but if gives you temporary flexibility to help you catch up.
- Loan extension: Your lender may agree to stretch out the term of your loan to reduce your monthly payment. You can also do this through refinancing your auto loan.
- Payment plan: Your lender may offer you a payment plan to help you catch up on your missed payments.
- Loan modification: Your lender may be able to adjust the terms of your loan. This might mean a change to your interest rate or your monthly payment.
- Hardship assistance: In extreme cases, your lender may be able to refer you to a hardship assistance program designed for those who are facing financial difficulties.
Step 3: Explore Refinancing
Earlier, we mentioned that you may be able to refinance your existing auto loan. This can be a super helpful option if you need to lower your monthly payments. Plus, the process is simple. Many borrowers refinance their auto loans in as little as 30 to 90 days. But in most cases, borrowers will wait for a year and see if there are better interest rates out there.
Either way, you can explore refinancing options at any time. And you may be surprised by how much you can save, especially when negotiating your interest rate.
Step 4: Consider Loan Assistance or Relief Programs
Though this isn’t necessarily a last resort, if you are struggling financially and see no signs of it getting better anytime soon, you may want to look into available programs. One option is the National Debt Relief program, which helps eligible individuals consolidate and reduce unsecured debt. This doesn’t necessarily apply to auto loans, but it can help free up cash by reducing some of your other monthly financial obligations.
Also, be sure to check and see if your employer has options available. You may be eligible for an employee relief or financial wellness program that can offer temporary assistance, financial counseling, or access to low-interest loans.
Step 5: Look for Ways to Free Up Cash
Remember that budget that we mentioned before? If you are wondering what to do when struggling with car payments, your budget is where you need to start. Using Microsoft Excel, Google Sheets, or even a piece of scratch paper, create a column for your wants, needs, and savings.
In the needs column, write down all of your ongoing monthly expenses, such as mortgage or rent, utilities, loan obligations, costs for groceries, transportation costs, insurance premiums, etc. These are the expenses that you need to maintain.
In the wants column, write down some of your other expenses, such as the costs for streaming services, how much you spend eating out each month, etc. Don’t forget the costs for those daily coffee runs, your last trip to the bookstore, etc.
Once you have everything laid out, look for areas where you can make some adjustments. Here are some tips.
Tips to Save Money
- Cancel or pause your unused subscriptions.
- Create a grocery list and cook at home.
- Call your utility providers to ask about budget plans or reduced rates.
- But generic or store-brand products whenever possible.
Tips to Make Some Extra Money
- Go through your home and collect items you no longer use. Try selling items online through platforms like eBay, Poshmark, or Facebook Marketplace.
- Consider your skills and start a side hustle.
- Offer services such as pet-sitting or dog-walking, babysitting, or lawn care in your community. You may be surprised by how many people are looking for someone to carry out these very services on their behalf.
- See if your employer offers opportunities for side projects or overtime.
Are You Struggling With Your Car Payment?
We understand how frustrating it can be to struggle with your car payments. The last thing you want is to jeopardize transportation, especially if you need to get to work and bring in a paycheck.
By taking some time to review and evaluate your budget, reaching out to your lender to discuss options, and checking into relief programs, you’ll be taking the right steps to get back into financial control. And if you are still struggling with making those car payments, consider auto loan refinancing with RateWorks. We’re here to help you explore smarter, more adorable auto loan solutions.
