What to Do to Avoid Default on Your Car Loan
It has been a difficult past few months for many Floridians, who have seen their hours reduced or their jobs disappear altogether. Many people have had to make tough decisions about how to spend what little money they have.
Many of our clients are desperate to keep their cars, and we can’t blame them. Without wheels, it is very hard to get to school or a job, to say nothing of running errands or making medical appointments. Below, our Plantation bankruptcy attorney identifies what steps to take so you can avoid a car repossession.
Contact Your Lender
If ever there was a time to discuss financial difficulties with a lender, now is it. Every lender has multiple debtors who are going through exactly what you are, so they will not be surprised if you call to explain why you can’t make your monthly payment. According to CNN, many lenders have set up programs to help their borrowers during the pandemic.
Be blunt. Explain your financial difficulties and why you can’t pay. Your lender might request paperwork to show that you lost your job, which could be a letter from your employer. Also explain whether you think your problems are short-term and when you might soon be back to work.
Also remember to call before the payment is due. This gives you more options. Once your lender sets the repossession process in motion, they might not stop it.
Consider Deferral Programs
Many lenders are deferring payments for 90-180 days. This gives borrowers some breathing room to ride out the worst of the recession before finding stable employment again. If you are offered deferral, discuss the details:
- Will interest continue to accrue during the deferral?
- If interest accrues, can you pay only the interest?
- Will the loan be lengthened, or will your monthly payments increase once the deferral ends?
You might have to sign a new agreement. Remember to check whether additional fees are charged at this time, which will only increase the cost of the loan.
Ask about Refinancing
This might be a better option than a deferral, especially if your credit is still good. When interest rates go down, you could end up saving quite a bit on your monthly payment by refinancing at a lower rate. Of course, if you still cannot make the monthly payment, then there is no reason to refinance.
Sell Your Vehicle or Trade It In
Sometimes, a person bought too much car and only realizes it later. You might want to downsize to avoid default. By selling or trading in your vehicle, you can pick up something cheaper that works with your budget.
As Autotrader reminds us, you will probably be responsible for the difference between the balance on your loan and the sale or trade-in value. Be aware of that. However, if your car has a high resale value, then there might be no or little unpaid balance.
Have You Considered Bankruptcy?
Debtors cannot eliminate car loans in bankruptcy, since they are a form of secured debt. But filing might be the right choice for you when you are feeling financial distress. Contact the Plantation bankruptcy attorneys at Nowack & Olson today to discuss your options by calling 888-813-4737.