If you feel like you’ve been struggling to keep up with car payments, you’re not alone: According to a recent report from the Federal Reserve Bank of New York, over 7 million Americans are at least 90 days behind on their auto loans.
It’s no secret that increased financial stress can weigh heavily on your personal well-being. The good news is, GreenPath can support you with the tools and resources needed to handle these types of situations. Our financial wellness experts provide these tips on how to avoid late auto loan payments and prevent repossession.
1. Take a deep breath and know everything will be okay. Make a commitment to focus on what matters most.
Your situation may feel desperate, but don’t panic! Take a deep breath, relax, and commit yourself to stay focused on your needs and goals.
Continuing to make payments on your debt is key to avoiding repossession. If you already have a spending plan, stick with it as much as you can, and make any necessary adjustments so that you can still meet your needs.
2 . Get a full picture of your current expenses and develop a spending plan.
Now is an important time to get an understanding of your full financial picture so you that you can make any necessary adjustments to get back on track. This Budgeting Worksheet is a great tool for tracking your income and expenses, to get a better picture of your current financial situation. It can also help you identify expenses to cut back on so that you can get back on top of your loan payments.
Once you’ve cut out unnecessary expenses, it’s important to make a plan for how you will pay your remaining expenses (aka a spending plan.) A spending plan makes it easier to stick to your goals and avoid the temptation of splurging on something when you’re feeling down. It can also help you avoid late auto loan payments.
Commit to paying off your quality of life expenses first- things like rent, groceries (and your vehicle payment, if your car is essential to your ability to earn an income.) Then, see if there are additional areas where you can cut spending (non-essentials like subscriptions and entertainment) until you are back on track.
3. Investigate your options. Addressing your needs proactively can help you get back on track sooner.
It’s very likely that if you are behind on your auto loan payment, your lender will be actively reaching out to you. Fight the urge to avoid their calls and try to have an active dialogue with them. Most lenders don’t want to repossess your vehicle, and many are willing to work with you to create a flexible plan for your needs. However, auto repossession proceedings can sometimes begin as soon as a single missed payment takes place. The sooner you can discuss your situation with your lenders, the better. Here are some options that your lender may be willing to offer you:
- Loan Forbearance/deferment: a “pause period” that allows you to take a break from making one or sometimes several payments on your loan.
- Repayment Plan– if you are behind on your loan, this option allows you to pay the late amount as a smaller addition to your regular payment, spread out over several months.
- Change of Due Date– a change in when your payment is due so that your car payment isn’t due at the same time as other big payments like student loans, mortgage or rent.
- Voluntary Repossession– If you believe that you truly can’t afford your vehicle, working with the lender on a voluntary repossession may allow for some reduction or forgiveness of some fees and costs associated with the repossession.
Each of these options has pros and cons to consider, including how interest is treated, how much you will owe, and potential impact on your credit score.
Additionally, even if your auto loan lender won’t work with you, you may find other lenders or creditors that can offer support. For example, student loan lenders will often allow forbearance or temporary payment reductions in times of hardship. This option may allow you to use those funds to catch up on your late auto loan payments or higher-priority expenses.
If you are a HUECU member, call GreenPath, our financial wellness partner for unbiased, caring support
They are here to help you understand your financial situation, pay off your debt and save money. Even if your car has already been repossessed, They can help you understand the process and provide you with additional options or steps that you can take to get your finances where you want them. Their financial coaches will help assess your situation, explain the options or solutions available, and help you create a spending plan to meet your goals.