When you bought that brand-new car, everything was going great. The job was going well and, in general, things were on the up and up. But recently, things haven't been so great.

It's easy to simply throw up your hands and give up when you have financial problems. But before you resign yourself to the idea that you will have to stop making payments on a loan, like your car loan, there are some options to consider that can help you.

If you find you can't afford your car payment, the worst thing you can do is nothing. There are many possible solutions and you need to take action as soon as possible.

Talk to Your Lender

Communication is your friend. The worst thing you can do in this type of situation is not talk to your lender. What you need to do is call them, explain your situation, and be honest with your lender. They will see that you are attempting to work with them in fixing the problem, as opposed to adding to it.

Most lenders have options available besides turning in your car, such as payment deferment, where you will be excused from making payments for a couple of months. Then, they will add on these payments to the end of the loan term.

This may just give you the time you need to get back up to speed financially. So, speak with your lender to find out what they can do.

The worst thing you can do if you fall behind on your car loan is resign yourself to the fact that your car is going to be repossessed. Nobody wins when a vehicle is taken back. It's far better if you try to work with your lender to come up with a solution.

The sooner you're able to talk to them, the more you can limit the damage that can be done to your credit and finances. Acting fast should also mean that more options are available to you.

Get Current on Your Payments

If you missed a payment (or multiple ones) by oversight or due to a temporary setback, you should prioritize getting caught up. You can still speak to your lender and ask about late fees, but getting current should stop the situation from becoming more serious.

Ask for a Deferral or Due Date Change

Can't afford Car Payment

Talk to your lender about their deferment policy. Many lenders offer short deferment periods that you can use to get your finances in order. Ask for a 30-day deferral, or longer if you need it, to get back on track for the long haul.

Some lenders also offer forbearance, a fancy word for a temporary payment pause. Others will let you make reduced payments for a period of time until your financial situation is righted.

Typically, any skipped payments will be added to the end of the loan. Usually, this means interest still adds up during the down period. However, deferment and forbearance offer quick fixes for those dealing with temporary financial trouble.

You can also ask to change the date of your payment. If you can adjust your payment schedule so it's more convenient, this can help you avoid being late.

Be warned that there could be fees involved with adjusting your payment plan. Make sure to discuss all of this with your lender and to get any changes in writing.


If you need a solution that will take more time than the one listed above, perhaps you should consider refinancing your auto loan into a longer loan term.

If possible, see if you can refinance the loan. This can allow you to:

  • Extend the loan term - If you do this, you'll reduce the amount of your monthly payment. However, this will also result in additional interest charges over the loan term.

ACE Tip: If you choose this option, we strongly recommend that once your situation improves, you get back into a shorter loan term. While you will be paying less per month, you will be paying more in interest charges in the long run.

  • Get a lower interest rate - If your credit has noticeably improved since you've taken out the loan, it's possible that refinancing might result in a lower interest rate. In this scenario, refinancing could lower your monthly payment even if you don’t extend the term.

Sell or Trade Your Vehicle In

If none of the above options are for you, perhaps you should consider a more affordable used car. If you made a substantial down payment on your current vehicle, it is possible that you have some positive trade equity in it. And the remaining value can go towards the down payment on a cheaper used vehicle.

You may need to re-evaluate your budget and car choice if your financial situation has changed permanently. If you find you can no longer afford your vehicle, consider trading it in for something more affordable. If you have equity in it, you could even sell it and pay off the loan.

If you owe more on your loan than the car is worth, then you will either need to pay that remaining amount off, or you could possibly roll it over into the new loan if the dealer allows it.

The Bottom Line

Most people need their car to go about their everyday lives. Just remember that the worst thing you can do if you're about to fall behind on your car payment is nothing. Take action by calling your lender and talking to them to figure out a solution.

If you are in a situation where you need a cheaper car, we can help. Our team is dedicated to finding you the best deal possible, fast. If you're in the market for a car, you don't need to let your credit issues slow you down. At Auto Credit Express, we connect car buyers to local dealerships that specialize in working with unique credit situations. Get started today!