What to Do If You’re Falling Behind on Car Payments

Falling behind on your car payments can be stressful, especially when you rely on your car to get to work and handle everyday responsibilities. The good news is, you do have options. Ignoring the problem only makes things worse, so the key is to act quickly and know your choices.

1. Talk to Your Lender Immediately

Most people are afraid to call their lender, but that’s actually your first step. Car finance companies don’t want to repossess your car—it costs them time and money. If you let them know your situation, they may offer solutions such as extending your loan term, reducing your payment temporarily, or even deferring a payment or two until you catch up.

2. Refinance Your Auto Loan

If your credit is still in decent shape, refinancing might lower your monthly payments by giving you a longer term or better interest rate. This can free up some cash each month and make the payment more manageable.

3. Consider a Voluntary Repossession

This isn’t ideal, but if you know you simply can’t afford the car anymore, giving the vehicle back voluntarily can save you some of the repossession costs and embarrassment of having the lender come get it. Keep in mind, you’ll likely still owe the difference between what the car sells for at auction and your loan balance.

4. Sell or Trade the Car

If your car is worth more than what you owe, you may be able to sell it and pay off the loan. Even if it’s close, trading it in for a less expensive vehicle with lower payments might be a smarter long-term move than struggling each month.

5. Hardship Programs and Forbearance

Many lenders offer hardship programs for borrowers going through tough times like a job loss, medical emergency, or sudden income drop. One common option is a forbearance, where the lender allows you to temporarily pause or reduce your payments for a set period. This doesn’t erase what you owe—those payments are usually added to the end of the loan, or spread out once the forbearance ends. The benefit is that it gives you breathing room without late fees piling up or your credit taking an immediate hit.

Some lenders also provide short-term interest rate reductions, payment extensions, or special repayment plans to help you get back on track. The key is proving your hardship with documents like unemployment letters, medical bills, or proof of reduced hours. If approved, these programs can buy you valuable time and protect you from repossession while you stabilize your finances.

Falling behind on car payments doesn’t mean you’re out of options. Whether it’s working with your lender, refinancing, or making the tough choice to downsize, there are ways to protect your credit and avoid the long-term damage of repossession. The worst thing you can do is nothing—be proactive, and you’ll come out in a better position.

For help with negotiating a car forbearance or removing a repossession off of your credit report, email us at agardfinancialfoundation@gmail.com