Too Much Car?

Here’s What to Do if Your Loan is Overwhelming

Buying a new car is an exciting experience, but sometimes, in the excitement of choosing the perfect vehicle, you might end up with more car than you can afford. If you find yourself struggling to make your monthly car payments coupled managing other expenses or debts, don’t panic. There are several strategies you can use to make your loan more manageable without defaulting on payments or damaging your credit score. Here are a few practical solutions to help ease the burden of an expensive car loan.

1. Stretch Out Your Loan Term

One of the simplest ways to lower your monthly car payment is to extend the term of your loan. Many car loans are structured to be paid off within 48 to 60 months, but some lenders offer options to stretch the repayment period to 72 months or even longer.

Why this helps:

• By increasing the loan term, your monthly payments decrease, making them more affordable.
• Modern cars are built to last, so keeping your car for a few extra years shouldn’t be a problem if you maintain it well.
• Spreading out payments can provide breathing room in your monthly budget, allowing you to manage other expenses more easily.

Considerations:

• While extending your loan reduces monthly payments, it may result in higher total interest costs over the life of the loan.
• Ensure that your lender doesn’t charge excessive fees for extending the loan term.

If extending your loan helps you regain financial stability, it’s worth considering as a short-term solution while you work on improving your overall financial situation.

2. Refinance Your Car Loan

Another way to reduce your monthly payment is by refinancing your car loan. If your credit score has improved since you originally financed the vehicle, you may qualify for a lower interest rate, which can significantly reduce your payments.

Why this helps:

• Lower interest rates mean lower monthly payments.
• Even if your credit score hasn’t improved, credit unions often offer better rates on refinancing.
• The process of refinancing a car loan is quick and easy, typically taking only about 15 minutes.

How to refinance:

• Check your credit score to see if you qualify for better rates.
• Shop around to find the best deal.
• Compare terms carefully to ensure you’re getting a lower interest rate and favorable loan terms.
• Complete the refinancing process and start saving on your monthly payments.

Refinancing is one of the most effective ways to lower your car payment without extending the life of your loan significantly. If you haven’t explored this option, it’s worth checking out.

3. Use your Cars Equity to Pay off Debts or Cash Out

If you need some cash for an emergency or are carrying other debts that are making it hard to make ends meet each month, using the equity in your vehicle may be an option. You can combine debts to only have one payment to manage saving on interest or just the monthly payment.

Why this helps:

• Borrow against the difference between your car’s value and what you still owe on it. 
• Use the funds from the loan to pay down other debts. 
• Get a lower interest rate because it’s a secured loan. 
• Can save money by paying down high interest debt. 

Considerations:

Before deciding to use your car as collateral for a loan, there are several important considerations to weigh.

• Make sure you can afford the monthly payments.
• Determine whether your car is worth enough to cover the loan amount you need.
• Shop around for the best interest rates, loan terms and fees then compare offers from different lenders.
• Always read the terms and conditions of the loan agreement carefully.

This kind of debt consolidation can help with cash flow and could provide lower payments, but make sure it is the best option for you and your budget.

Final Thoughts

Being stuck with an unaffordable car payment can be stressful, but you do have options. Whether you choose to extend your loan, refinance for a better rate, or consolidate debts with the equity in your car, there are ways to make your financial situation more manageable.

The key is to take action as soon as possible. The longer you wait, the more financial strain you may experience. Evaluate your options, choose the best solution for your situation, and take control of your car loan before it takes control of your budget.

By making a few smart adjustments, you can keep your car while maintaining financial stability. Don’t let a high car payment hold you back—explore these solutions today and get back on the road to financial freedom!

If you have questions about auto loan financing options available to you, reach out to a Town & Country Federal Credit Union member service representative by stopping to a branch, emailing us at info@tcfcu.com or by calling 800-649-3495.