Does it always feel like there is more month than money??? I feel you…
I remember there was a time when I would dread the 1stof the month.
Remember the part in the first Harry Potter, where like a million letters came flying into the house from every window, door, and even the fireplace?
Well yea, that was my mailbox when the 1strolled around…coughing out bill after bill.
And even though we made what most peeps would consider to be good money, it always seemed like the next paycheck couldn’t come fast enough.
We would resort to robbing Peter to pay Paul, taking cash advances off of credit cards just to pay the bills. It was literally a house of matchsticks waiting to go up in flames.
And like clockwork, when things were already going to hell in a hand basket, Murphy and his dumb law showed up to kick us in the teeth…
The hubs lost his job, and we REALLY couldn’t afford either of our massive car payments anymore and we didn’t know what to do.
Late at night I would lay in bed thinking, “There’s no money, how are we going to pay for the cars? Are we going to lose the cars? How will that impact our credit? What will our friends and family think? How did we end up here? This is embarrassing!”
At the time, no one in our immediate circle of friends and family had gone through such a drastic money meltdown. So I turned to my bestie, Google, for options.
We tried them ALL. Some of the advice we found was completely useless, and some of it was pure gold…things we had never thought of on our own.
Trust me when I say, I know exactly how you’re feeling. #beentheredonethat I remember feeling so lost, anxious, and fearful too. But I gotcha back! You don’t have time to spend days and weeks sifting through the crap for solutions to find what actually works. I’ve done it for you!
Grab a pen and take notes, or bookmark this page for future reference.
STOP: DON’T DO ANYTHING ELSE UNTIL YOU DO THIS
Communicate – DON’T HIDE!!! I repeat…DON’T HIDE!!! Don’t be scared of your lender. While they aren’t going to be all warm and fuzzy about this, it is in their best interest to help you out…they know this, they want their money and working with you is the best way to get it.
Imagine if one of your friends owed you money and all of a sudden they stopped making payments, stopped taking your phone calls/texts, and were harder to find than a leprechaun.
Wouldn’t you be upset? You would’ve probably been receptive to hearing their case if they would’ve just called you. Yea, it’s the same with your lender. They are the first person you should call when you know your money is about to get funky.
One, because its in their best interest to figure out a solution, if they take the car back, they are sure to lose money trying to repossess and then resell a used care.
And two, it’s a pain in the arse to try to repossess and then resell a used car. They are in the lending business…not the car selling business.
You’ll be surprised at the solutions that may be available to you, but only if you are proactive about this. CALL YOUR LENDER!
TEMPORARY OR PERMANENT
First things first, you need to figure out if your cash shortage is temporary or permanent. Meaning, did you have a hiccup in your finances and money is just a lil’ tight right now? Do you need just a little breathing room for a couple of months, then you can get right back on track?
If this sounds like your situation, then the problem is most likely temporary…skip to the first section below.
Have you been laid off or received a permanent reduction in your income? Did you get hit with some heinous bill that’s going to take years to pay off? (frowning at you IRS) Did your spouse decide to trade you in for an upgrade and take half the family income with them?
If this sounds more like your situation, first off, GIRL I am so sorry! We can at least handle the car trouble…skip to the second section below.
If you already know your situation is an emergency, meaning you’ve missed multiple payments, CANNOT afford the car under any circumstances, or have NO income coming…skip to the last section.
SECTION 1: IF YOUR SITUATION IS TEMPORARY
Did you skim through and now you don’t know if this section is right for you, no hard feelings…I skim too. You’re in the right spot if you know that your money just took a small hit and will return to normal in the next 30-60 days.
If your situation is temporary, then our goal is just to get you some breathing room for a couple months so you can recover from whatever financial setback that’s kicking your arse.
- Renegotiate Your Loan – This basically means that you are asking for a short-term leniency on some part of your loan. The two ways that worked best for us requesting a loan deferment or a temporary reduction in the payment.
A loan deferment is simply where the lender agrees to take the next payment or two and tack them onto the end of the loan. In this scenario, you don’t make those payments until the end of your loan, giving you a little break for those rearranged payments.
A temporary reduction in your payment is just that…the lender agrees to lower your payment for a short period of time, allowing you to get back on your feet.
- Refinance Your Loan – This option is limited to those who have not missed payments yet and their credit is still in good standing. If this is you, then right on sista!
If you financed your car through the carmaker’s financing company (ie. Toyota, BMW, or Ford finance), then it is highly probable that you can get a lower rate from another lender. You can typically get lower rates through your local credit union. Lowering the rate can help to get the car payment in more comfortable range.
When you refinance, you can also extend the term of your loan. For example, if you’re currently in a 36 month contract, moving to a 60 or 72 month term will drastically lower your payment and make them more affordable.
A word of caution, for both of these strategies you are essentially extending the term of your loan which means you will pay more interest in the long run. But if the goal is just to be able to get through the next few months and back on track, then the extra interest may be negligible. Just make sure to consider this when making a decision.
SECTION 2: IF YOUR SITUATION IS PERMANENT
Did you skim through and now you don’t know if this section is right you, no hard feelings…I skim too. You’re in the right spot if you know that the reduction in your money is unlikely to change in the foreseeable future.
If your situation is permanent, then the goal is NOT to attempt to keep the car! At this point it is time to cut your losses and do damage control. We want to be able to get you out of the car without deteriorating your already vulnerable financial situation even further, and with as little damage to your credit.
- Sell Your Car – Now is NOT the time to be prideful, if your car payment is murdering your money, now is the time to cut your losses! You can do this two ways and neither will have a poor impact on your credit score.
You can sell your car private party. This means advertising it on Craigslist, Autotrader, or whatever other way you can dream up. You typically get the most money by selling your car to a private party.
Just be aware that if you accept an offer for less than what you own, you will need to write a check to cover the difference. Most buyers will want to see this done, PRIOR to purchasing the car from you.
Or you can sell your car to a dealership. You can use tools like KBB.com’s instant cash offer to see how much you can get, and even drive it right over to the listed dealership to sell the car immediately.
The hubs and I took advantage of the KBB cash offer after we’d made a boneheaded move and bought a swanky Benz E550.
While we could afford the payments, there were waaayyy better things we should’ve been doing with that $1600 payment…yes, you read that right!
Hey, I said it was boneheaded!!! We had to write a $8,000 check to get out of the car, but in the end it was well worth it. A freakin’ expensive lesson.
If you are heavily upside down in your car, meaning you owe a lot more than it is worth, this method may not be the best option for you. Because again, you are going to have to write a check to cover the difference between what you owe and what they will give you for the car. Or you can attempt to negotiate a payment arrangement on the balance owed with the lender (which we have successfully done in the past too).
- Trade Your Car In – Get dat butt down to the nearest Honda or whatever inexpensive car dealership and trade that puppy in. This strategy works best if you either have equity in your car or can break even (you owe about what it’s worth) AND the car you purchase is much less expensive than the one you are trading in.
While this does technically reset the clock on your loan, it can you get you the lower payments you need.
IF YOUR SITUATION IS AN EMERGENCY
Did you skim through and now you don’t know if this section is right you, no hard feelings…I skim too. You’re in the right spot if you’re drowning and can’t see a way out. You’ve missed payments and just need to get out.
If you know that your situation has gotten to a full scale crises, then the main goal is to quickly stop the bleeding by getting rid of the car altogether by any means necessary. It’s time to go into survival mode and just get the ish done.
Please for the love of all that is holy, DO NOT use this setback as a reason to beat yourself up or throw a whole entire pity party for one. You made some mistakes, or life just hit you a little harder than you were ready for.
THIS IS OK AND NORMAL!
We all make mistakes or hit rough times! The difference is that winners like you learn from it, dust themselves off, and MOVE ON! You got this Sis! #winnersoverwhiners #victoryovervictim
- Voluntary Repossession – This just means that you call the lender and let them know what your situation is, and you voluntarily give them the car back. They will simply schedule a time to come and get the car and that’s it, no extra fuss.
Keep in mind that this WILL negatively impact your credit score and the lender has the right to collect the deficiency (difference between what you owe and what they are able to sell it for) amount from you. You may be able to negotiate a payment arrangement on this balance.
In an emergency, ya’ gotta do what ya’ gotta do! No shame involved.
- Let It Get Repossessed – This means that you basically wait until the lender decides to come and take the car from you. I don’t typically recommend this except as a VERY LAST RESORT for multiple reasons.
One, you potentially give up any negotiating power you have on a payment arrangement for the deficiency (see #2 above).
Two, the 3rdparty costs incurred for having to track you down and forcibly take back the car will eventually be added onto your deficiency balance…costing you more money.
And three, its already a stressful time, why add more stress with the worry of losing your car at ANY GIVEN MOMENT!
- Bankruptcy – If your financial situation has become unmanageable and is affecting other areas of your life, then it may be time to consider filing bankruptcy. Please seek the help of a professional bankruptcy attorney!
I know it’s totally scary and unsettling to realize that you are facing a financial fiasco. But if you’re proactive and take action EARLY, the more options you’ll have available to salvage your situation with minimal impact on your money or your credit score.
Remember, you’re not alone. Sometimes we make mistakes and sometimes life throws us curveballs. But you gotta get back up, adjust your crown, and take the next swing.
When you can’t pay your car payment, remember to act fast, call you lender, DON”T HIDE. You have options, seek them out and use them. In the end, it’s not about the obstacles or the failures, but how you learn to overcome them!!!