If you need to make money-saving changes, you might consider refinancing your auto loan. This option provides you with the opportunity to lower your monthly car payments by either reducing the interest charges with a lower rate, or by extending the loan term.
However, when it comes to refinancing a loan, there is one hitch: Your credit rating. If you have taken hits to your credit score and have not had the time or money available to fix the issues, refinancing with a better interest rate is likely not an option for you.
And sometimes the reasons your credit score may be damaged aren't obvious things like missed payments. It could stem from too much of a dependence on credit cards, which results in high balances. Or, it may have less to do with your credit and more to do with a reduction in your income, which will affect your debt-to-income (DTI) ratio. Fortunately, there are some things you might be able to do if you aren’t able to refinance your car loan.
Auto Refinancing Alternatives
If your credit has made it difficult to get your vehicle refinanced, consider these alternatives.
- Put the car up for sale yourself.
Cars lose their value fairly quickly, so if you bought the car with a no money down financing program, your vehicle may be worth less than the loan balance. However, if you did make a down payment, you could have equity in the vehicle, and you might at least break even on the sale. You will need to find a buyer and negotiate the price of the car with them. In order to complete the sale, you will need to get the 10 day payoff from the lender - this will tell you how much the remaining balance of the loan is. However, after 10 days, the amount will change due to the interest charges. Also keep in mind that once you have sold it, you'll probably need another vehicle.
- Talk to your lender.
Is your current financial situation temporary? If so, you may be able to get your lender to defer your monthly car payment. Now, they typically only allow you to do this for two months, and the deferred payments will be tacked on to the end of the loan term. Keep in mind that you will need to explain to the lender, in detail, why you cannot make the payments.
- Cut other areas of your household budget.
Can you make changes to your budget, such as a adjusting your cable or phone plan? Or, perhaps you could cut back on eating out or other recreational activities. Reducing your spending in any or all of these areas may provide you with enough funds to pay down your debt, or to maintain your monthly car payment until your income improves.
Get the Car That Fits Your Budget
If you had to part ways with your vehicle because you couldn’t afford it and need a more affordable one, come to Drivers Lane. We can help you find a car that fits in better with your current budget. All you need to do is complete our quick and simple online application, and then we will connect you with a dealer that can work with your unique financial situation. Apply today, drive tomorrow!