By Colleen Tressler – FTC, Division of Consumer and Business Education
Trouble making car payments? Worried about repossession? Unexpected life events, like a job loss or drop in income, may affect your ability to pay your bills, including car payments. If you’re worried that you won’t be able to make your next car payment, take action as soon as possible. If you get behind on your payments, your lender could repossess your car – sometimes without warning. Read on to learn what to do.
Contact your lender now. Don’t wait for the company to repossess your car. Many lenders will work with customers if they think you’ll be able to pay soon, even if the payments are slightly late. If your lender agrees to any changes, make sure you have them in writing for later.
Find out what rights you have in your state. Check with your State Attorney General. States have their own rules about how cars can be repossessed and what happens after.
See if you can refinance your loan. This could make sense if a lower interest rate or longer loan could make your car payment doable. Be aware that a longer loan with reduced payments could help your current situation but also could increase your total costs. Make sure you refinance with a credible lender or company.
But whatever you do, don’t try to avoid the problem by doing nothing. Even if you have to miss a payment, don’t be afraid to talk to your lender to learn about your options. Taking action early may help you limit or avoid paying more fees. A repossession could make it harder and more costly to get credit in the future. And you might be on the hook for any difference between what your lender gets for selling the car and what you still owe on it, plus any fees related to the repossession.
Colleen Tressler is a Senior Project Manager at the Federal Trade Commission.
