Struggling to keep up with your car payment? You’re not alone—and you have more options than you might think. Whether your income dropped, expenses shot up, or the loan was just too aggressive to begin with, missing payments can snowball fast.
The good news is, you’re not stuck. There are several ways to lower your monthly payment, pause it temporarily, or get out of the loan entirely. Some choices protect your credit, while others should only be used as a last resort. This breakdown covers the smartest moves to make—before things spiral out of control.
What to Do if You Can’t Afford Your Car Payments
Missing a car payment can feel like the start of a financial spiral—but it doesn’t have to be. Whether you’ve had a sudden drop in income or the loan was a stretch from the beginning, there are ways to get relief without wrecking your credit. The key is acting quickly and choosing the best option based on your situation. Here’s what to do next.
1. Talk to Your Lender First
Before you miss a payment, contact your lender and explain what’s going on. Most lenders are willing to work with you if you reach out early. They may offer short-term solutions that give you breathing room without damaging your credit.
Don’t wait until you’re already behind. Once you’re in default, your choices shrink, and the lender becomes less flexible. By calling before your due date, you keep the conversation on your terms and open the door to better options.
2. Request a Loan Modification
If your financial setback is temporary, a loan modification could help. Lenders sometimes allow skipped payments to be added to the end of your loan or spread out across future payments. This can give you a few months of relief while keeping your account in good standing.
Loan modifications work best if you haven’t missed more than a payment or two. Be upfront about what caused the problem and when you expect your finances to improve. If the lender sees a clear plan, they’re more likely to say yes.
Watch out for companies that promise loan help for a fee. Stick with your lender, and never pay upfront for help with a modification.
3. Refinance Your Loan
Refinancing your car loan can make your payments more manageable—especially if your credit has improved since you took out the original loan. You might qualify for a lower interest rate, a longer loan term, or both.
A lower rate helps you save on interest, while a longer term spreads out your balance across more months. Just be aware that extending your loan means you’ll pay more interest overall, even if your monthly bill drops.
You can refinance through your current lender or shop around with banks, credit unions, and online lenders. Always compare rates, fees, and terms before making a move. And act before you fall behind—late payments can hurt your credit and make refinancing harder.
See also: Best Auto Refinance Companies of 2025
4. Sell the Car
If keeping the car no longer makes sense, selling it could be the fastest way out of your loan. This works best when your car is worth at least as much as you owe—or close to it.
You can sell it privately or trade it in at a dealership. A private sale usually gets you more money, but a trade-in is quicker and easier. Either way, the goal is to pay off the loan and walk away without a monthly payment hanging over your head.
If you are upside-down on your car loan, you’ll need to pay the difference. That might mean using savings or taking out a small personal loan. It’s not ideal, but it’s still better than falling behind and risking your credit.
5. Get Someone to Take Over the Loan or Lease
In some cases, you might be able to hand off your payments to someone else. With a lease, this is called a lease transfer. There are websites that help match you with people looking to take over an existing lease.
For loans, it’s a little trickier. Most lenders won’t officially transfer a loan to a new person, but you can sell the car to someone who gets their own loan to pay off yours. This works best with friends or family, since there’s more trust involved.
Before going this route, read the contract carefully. Some leases keep you on the hook even after a transfer, and some loans have early payoff fees. Make sure you know the risks before signing anything.
6. Consider Voluntary Repossession
If none of the above options work, you might think about turning in the car yourself. This is called a voluntary repossession. It’s still damaging to your credit, but it’s better than having the lender come take the car without warning.
You’ll still owe the remaining balance after the car is sold, especially if its value doesn’t cover the full loan. That leftover balance is called a deficiency, and the lender may send it to collections if you don’t pay.
Before taking this step, talk to your lender. You might be able to negotiate the remaining amount or work out a payment plan. It won’t erase the hit to your credit, but it could limit the long-term financial damage.
7. Explore Bankruptcy Only as a Final Option
Bankruptcy can wipe out some or all of your debts, but it comes with serious consequences. It stays on your credit report for up to 10 years and can make it harder to borrow money, rent an apartment, or even get certain jobs.
This route might make sense if your financial situation has collapsed across the board—meaning your car loan isn’t the only problem. If you’re dealing with medical bills, credit card debt, or other loans you can’t repay, it could be worth considering.
Before making any decisions, talk to a bankruptcy attorney. Many offer free consultations. A good attorney can help you understand what type of bankruptcy—if any—makes sense and what it would mean for your car, your home, and your credit.
Final Thoughts
Falling behind on your car payment can feel overwhelming, but you’re not out of options. Whether you refinance, sell the car, or work something out with your lender, acting early gives you the best shot at protecting your credit and avoiding long-term damage.
The worst thing you can do is ignore the problem. Take the first step now—even if it’s just a phone call to your lender. It could save you thousands and help you get back on solid ground.
Frequently Asked Questions
Can I trade in my car if I still owe money on it?
Yes, you can trade in a car with an active loan, but it depends on the car’s value. If your car is worth more than what you owe, the difference can go toward your next purchase. If you’re upside down, the remaining balance will likely be rolled into your new loan, which could make your next payment even higher.
How many payments can I miss before repossession?
Most lenders can start the repossession process after just one missed payment, though it’s more common after two or three. The timing depends on your loan agreement and state laws. Some lenders act quickly, so it’s best not to assume you have a grace period.
Will deferring a car payment hurt my credit?
If you defer a payment with your lender’s approval, it won’t hurt your credit as long as the agreement is documented and reported correctly. But if you stop paying without a formal agreement, it will show up as a late payment and damage your score.
Can I negotiate a settlement on a car loan?
In rare cases, lenders may accept a lump-sum payment that’s less than the total amount owed—especially if you’re far behind and they want to avoid the cost of repossession. This is called a loan settlement. You’ll need cash on hand, and it could still impact your credit.
What happens to my car loan if I pass away?
If you pass away with an outstanding car loan, the responsibility doesn’t disappear. The lender can claim the car or require your estate to pay off the remaining balance. If a co-signer is on the loan, they’ll be fully responsible for the payments.
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