Is There Any Way Out If I Am Buried in My Car Loan?

Selling your car is one way to dig out of a bad loan situation.

Selling your car is one way to dig out of a bad loan situation.

Sinking beneath the burden of making car payments you can no longer afford is worrisome and stressful. Worse yet, there's the threat of repossession, especially if you’ve missed more than one payment. There's a way out of this mess, but it will take some sacrifices to dig yourself out.

Repayment Plan

The bank doesn’t really want your car, so they’re likely to work with you once you get behind in your payments. The key to getting them to help you is to call as soon as you miss a payment. Explain the situation and let them know you’d like to work out a payment plan to get caught up. Some banks may push your loan back a few months, giving you time to come up with the money. Others may add the missed payments to the end of your loan. That will extend the loan period, but it will give you time to catch your breath.


If your credit rating or payment history has been good until this point, ask the bank to refinance your loan. A refinance might even result in a lower interest rate. The bank can go with another option and offer you a loan spread out over a longer period of time at a higher interest rate. While you’ll pay more in the long run, the smaller monthly payment might be easier to make.

Sell Your Vehicle

Selling your car may sting when you still owe money on it, but it beats sinking further into debt and building up a bad credit rating. First, determine how much you owe on the car, and then find out if that amount will pay off the loan. A car’s value depreciates by the year, so don't be surprised if you find out you owe more than you can get for your vehicle. Be prepared to come up with some cash to pay off the loan.

File for Bankruptcy

Consider this a last resort since filing for Chapter 13 will punish your credit rating. But it does protect you from creditors, which means the bank can't repossess your car or call you to collect payments -- as long as you live up to your obligations. Chapter 13 bankruptcy gives you an opportunity to create a three-to five-year payment plan to catch up with your debts. Once this plan is filed with the court, you must make the payments as scheduled. If you miss a payment, the bank can start calling you again to get its money, or worse yet, repossess the car.


About the Author

Nancy Wagner is a marketing strategist and speaker who started writing in 1998. She writes business plans for startups and established companies and teaches marketing and promotional tactics at local workshops. Wagner's business and marketing articles have appeared in "Home Business Journal," "Nation’s Business," "Emerging Business" and "The Mortgage Press," among others. She holds a B.S. from Eastern Illinois University.

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