The number of Americans using auto loans to pay for a car purchase is higher now than it has ever been, data released by the Federal Reserve Bank of New York shows.
But as more and more Americans are taking out auto loans to buy cars, more of these loans are going into default.
About 6 million people are currently more than 90 days late on auto loan payments, according to CNN Money. And those missed payments are putting more people at risk of repossession, which, in many lower income families, could mean no longer having a way to get to work
As with any debt, if you find yourself close to defaulting, don’t bury your head in the sand. The earlier you act, the more options you have to keep your head above water and your car in the driveway.
About to Miss a Car Loan Payment? Here’s What You Can Do
The Consumer Financial Protection Bureau has four tips for you if you’re on the verge of losing your car because you can’t keep up with the payments.
1. Determine If You Can Really Afford the Car
Take the time to look over your finances and decide if the expensive car loan is really in your budget. Maybe when you made the purchase you were in a different financial position than you are now.
If you have not yet defaulted and you can afford a car (just not the one you have), trading the pricier car in and downsizing to a more affordable option could be the solution for you if your current payments are eating away at your bottom line.
2. Don’t Dodge Your Lender
Whether you got your car loan through your bank, a local credit union or through the dealership itself, as soon as you realize that you may miss your first payment, your lender should be your first call.
Often, there may be options for you that could ease your financial burden and help you keep your car. Contacting your lender early shows that you intend to make good on your loan.
3. Change Your Payment Due Date
In most cases, the due date of your auto loan is determined by the date you bought your car. But some people could find it easier to pay on time if the date came after their normal pay date.
Your lender may be willing to make that tiny change for you and it could help ensure on-time payments that save you costly late fees.
4. Set Up a Payment Plan
Traditionally, most people make their car payments once a month, but maybe two smaller payments scheduled around pay day could make the bill more palatable if you’re on a tight budget. Others may want to spread their loan period over more time to reduce their monthly payment.
But those are only two options. Your lender may have more options that allow you to change the way you pay and create a plan tailored to you.
Of course, before you sign up for an alternative payment plan, make sure you understand how it will impact how much you pay over time. Do the math to make sure the short-term solution also makes long-term sense.
Desiree Stennett (@desi_stennett) is a staff writer at The Penny Hoarder.
This was originally published on The Penny Hoarder, one of the largest personal finance websites. We help millions of readers worldwide earn and save money by sharing unique job opportunities, personal stories, freebies and more. In 2016, Inc. 500 ranked The Penny Hoarder as the No. 1 fastest-growing private media company in the U.S.
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