Easy Ways to Reduce Your Car Payment
Cars are necessary but expensive investments in today's world. Not to mention, it is easy to bite off more than you can chew with vehicle loans. While there are plenty of other things you would like to spend your money on, your car has to take precedent. If you feel overwhelmed with your vehicle payment, keep reading for a few ways to reduce your monthly dues.
Refinancing your original auto financing can reduce your debt by lowering your interest rate. If you have seen an increase in your credit score since purchasing your vehicle, or if you have been consistent with your payments and have equity in your car, you can easily get approved for a refinance. You can shop around for your options on sites like Credit Karma that are based solely on your individual credit situation. In some cases, you can lower both your monthly payment and shorten your loan term— which should certainly be a goal of taking on another loan. The following steps will give you an idea of what to expect of the process:
- Shop around and apply for refinancing.
- Wait to hear about approval.
- Once approved, be prepared to complete paperwork to finalize the loan.
- Your new lien holder will send a check to pay off your debt at your previous bank.
- Pay on your first loan until your account shows $0.
- Once your original loan is closed, start paying on your new one each month.
Look for a Trade-In
If your financial situation has changed since purchasing your car, you may look into how trading in your vehicle for a less expensive one could save you money. This will only be a smart alternative if the vehicle you own is worth more than the amount you owe on the loan. For example, if you have a vehicle that is worth $18,000, and you only owe $14,000, you have $4,000 to put down on a cheaper car. If not, you would have to put the remaining balance toward your new purchase, which can bring a number of issues. First, you are less likely to get approved in this situation. Secondly, this could be counterproductive in your efforts to lower your debt.
Repossession is the least favorable course of action, but if you are unable to afford your car, it may be inevitable. If your vehicle is repoed, you can expect it to impact your credit, and at some point, the bank will send a tow company to take the car. This is obviously the last thing you want to happen, but it doesn't have to be the end of the world. In fact, there may be last-ditch efforts available to steer clear of repossession. To avoid being without transportation, you can call your bank to see if there is any way to set up an alternative payment plan or forbearance until you can get back on your feet. It doesn't hurt to ask for help and explain your situation to your lien holder. Often, there are programs in place to help customers that have come into financial difficulties.
Accepting any loan is a big responsibility, and while financial situations tend to change frequently, banks expect their payments, nonetheless. When it comes to an item like a vehicle that is relied on so heavily, the anxiety of getting behind on your payments is insurmountable. The good news is, there are options available to lower the cost and lessen the financial burden. There is no shame in taking advantage of alternatives that will make it easier to manage your stress. If you are stuck with a car that you cannot afford, you will be learning from a mistake that you can ensure won't happen again.