If you start falling behind on payments, you probably know the consequences. Late fees, interest charges, credit score drop, and more. You know it sucks.
If you find yourself in that situation, you are not alone. A lot of Americans feel the pressure when it comes to meeting their financial commitments.
But there are things you can do to help yourself out of trouble.
First of all, act quickly and contact the lender. Never ignore the problem. Contacting the lender promptly will put you in a much better light than if you ignored the problem. The lender will most probably work with you to set up an alternative payment schedule, rather than demanding a missed payment straight away. Putting you in a better position to make future payments benefits both you and the lender.
However, things don’t stop there. Making a realistic budget will help you understand how and why you are falling behind on your bills. Get ready for some hard questions, and be honest with your answers. Can you do without a car for a year? Can you downgrade your cable or your phone plan? Stop eating out?
Adjust your needs and wants to fit the amount of money you got to spend. If you don’t spend more than you have, you are less likely to have bills or debts that you cannot pay. This is called living within your means.
What is important is that you don’t make the problem any worse. Studies suggest that many people are taking out further credit such as credit cards, or another loan, to make their loan repayments. This will only postpone the problem.
When it comes to your car loan, look at the agreement. It probably says that they can repossess your car any time you’re in default. No notice is required. If your car is repossessed, you must pay the balance due on the loan, as well as towing and storage costs, to get it back. Otherwise they will sell your car.
In this situation, you may be better off selling the car yourself and paying off the debt before they take the car. That way it will not hit your credit report.