Many new-car buyers choose to take out a loan to help them pay for the vehicle. Under most car loan contracts, a person will be required to make monthly payments until the debt is paid. If a person falls behind in making these payments, he risks a number of negative outcomes, including repossession of the vehicle. Fortunately, the debtor can receive help in a number of different ways.
Loan Modification
One of the easiest ways that a person can get out of car debt is to renegotiate the terms of the loan with his finance company. Although some finance companies will be unwilling to modify existing loans, others may change the structure of the payments. For example, a person may be able to change a five-year loan into a 10-year loan, allowing him to make smaller monthly payments.
Loan Refinancing
If a lender is not willing to modify the loan, a borrower may be able to approach other lenders about refinancing it. Although refinancing is more common with respect to home loans, many finance companies are also willing to refinance the loans on vehicles. A borrower should apply to a number of these companies and see whether any would be willing to buy the current loan and issue a new one with more favorable terms.
Additional Loans
In some cases, it may make financial sense for an individual to take out another loan to pay back his car debt. For example, if the person is being charged penalty fees for late payments on the car debt or is being threatened with the repossession of the vehicle, it may make sense for him to take out a short-term unsecured loan using a credit card, which he can then pay back later.
Debt Consolidation
If a person has multiple debts, including a debt for his car loan, it may make sense for him to consolidate his debts. Debt consolidators are lenders who make money by buying multiple debts from an individual and issuing a new loan roughly equivalent in size to the amount of the old debts. A debt consolidator may be willing to reduce the monthly payment size of a debtor, even if other lenders will not.
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