Consumers struggling with the economy are now struggling to keep their cars. Having a car repossessed impacts credit scores, thereby limiting your ability to get loans or credit cards for up to seven years.
According to the American Bankers Association, the number of direct auto loans that were at least 30 days delinquent increased to 3.01 from 2.03 percent during the first quarter of 2009, and delinquent auto loans through dealers hit 3.4 percent in March. And, according to Manheim Consulting, the number of repossessed vehicles jumped 12 percent to 1.67 million nationally in 2008 and is expected to increase by another 5 percent in 2009.
If a lender sells your car at auction, and it’s bought for less than the outstanding loan, you’ll still be on the hook to pay the remaining loan amount plus added fees.
If you’re falling behind on car payments, Better Business Bureau® recommends:
- Contact your lender. According to the American Financial Services Association, auto repossessions cost creditors about $8,000. Best-case scenario for both you and your lender is to keep you in your car and making payments. Lenders often work with troubled borrowers to develop more agreeable payment plans, such as refinancing, extending or deferring payments, changing payment due dates and waiving fees.
- Cut costs elsewhere. If you can’t afford to lose your car, consider eliminating items that you don’t absolutely need, such as cable television, eating out, cigarettes and new clothes.
- Choose a less expensive vehicle. If you’re not upside down on your loan, and can pay off the loan on the vehicle by selling it, consider finding a less expensive auto with monthly payments that are within your means.
- Do your research before enlisting debt-management help. Be wary of offers and sales pitches by debt-reduction firms that require upfront fees, and always check them out with your BBB. Credit counseling agencies offer inexpensive, and in some cases free, guidance on how to manage money. You can find a credit counseling agency near you through the National Foundation for Credit Counseling nfcc.org/
Start With Trust. For more consumer tips and information, visit bbb.org.