For many Americans, having a car is not just a convenience, it’s a necessity. Whether you rely on your vehicle to commute to work, take your kids to school, or access basic necessities, falling behind on your car loan can threaten not just your transportation, but your overall financial stability.
When debt piles up and monthly payments become unmanageable, it’s essential to take action immediately. In the case of auto loans, falling behind can lead to repossession, damage to your credit score, and ongoing debt collection calls. Fortunately, there are multiple debt relief options and debt management strategies that can help you avoid the worst-case scenario and get back on track.
The sooner you act, the more options you’ll have. If you're behind on payments, your first move should be to communicate with your lender. Ignoring calls or missing payments only increases the chances of repossession, additional late fees, and a lasting negative mark on your credit report.
Even if you're in trouble with credit card debt, personal loans, or other unsecured debts, your auto loan should be prioritized. Losing your vehicle could affect your ability to earn income, which in turn has a negative impact on your financial situation.
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As soon as you realize you're going to miss a payment, call your lender. Many offer options like:
Assess all your debts—including credit card bills, personal loan balances, and any outstanding balance on the vehicle loan. Use your credit report to understand the full scope.
Are your problems limited to the auto loan, or are you falling behind across all debts? If it’s the latter, you may benefit more from a broader debt relief solution or debt management plan.
If your auto loan problems stem from a larger struggle with debt, here’s how to think about your next steps:
A debt management plan can help you consolidate all your unsecured debts, including credit card and personal loan accounts, into one monthly payment. A credit counselor from a reputable credit counseling agency will help negotiate lower payments, interest rates, and even waive fees.
Debt management plans typically don't include personal loans or secured debt like an auto loan, but they can free up the cash you need to stay current on your car. Ask the credit counseling agency if they can help you structure your budget to eliminate certain debts and free up money to make your car payment.
Learn more: Achieve Financial Freedom with a Debt Management Plan
If your credit score is excellent, a debt consolidation loan might allow you to combine your debts into a single loan, possibly at a lower interest rate. This may not be suitable for everyone, especially if you already struggle with credit card debt, but it can be an option if you have steady income and manageable total debt.
Going back to the previous point, a debt management plan offers a kind of debt consolidation, where your monthly payment to your revolving debts is consolidated, but the debts themselves remain separate.
In this way a debt management plan gives your benefits of consolidating your credit card debt, but not your total debt. Things like personal loans, a student loan or child support would not be included, but the benefits of the debt management plan impact your overall ability to make your monthly payments.
Debt consolidation loans aren't always the best solution, and we often find a debt management plan is a better idea than taking on new debt. A new loan might carry high interest rates while adding a new dedicated account to your financial portfolio. To us, sound debt management means getting rid of debt, not adding new loans.
If you're serious about consolidation loans as a debt relief strategy, check out Experian's article on 10 Common Debt Consolidation Mistakes to Avoid.
If your car is worth more than you owe, selling it and paying off the loan might be the best solution. You can then buy a more affordable car or consider public transport. Alternatively, some lenders allow a transfer of loan, where someone else takes over the monthly payments, but the counseling agency or lender should help ensure the paperwork is done correctly to avoid legal or tax consequences.
As a last resort, voluntary repossession (turning in your car before the lender takes it) can reduce the damage to your credit report, though it still counts as a negative mark. Keep in mind, if the lender sells the car for less than the outstanding balance, you’re responsible for the difference.
This may be part of a broader debt relief program. If so, ensure you're working with professional debt arbitrators or credit counselors who can explain all potential negative consequences and ensure you're not falling prey to debt relief scams.
It's important for us to stress a holistic solution for debt relief. If your financial situation isn't good, then typically we find you're having trouble paying multiple bills. The debt management clients we counsel often have issues with medical debt in addition to credit card debt, and need help dealing with things like their credit score and handling debt collectors.
If auto loan issues are part of a deeper debt crisis, a comprehensive debt management or debt relief program may be necessary. These options can include:
There are a lot of good credit counseling agencies out there; we just happen to think Credit.org is the best. Wherever you do go for debt relief, make sure to verify the legitimacy of any service through the Better Business Bureau. This goes for debt settlement companies or any local credit counselor.
· Track all your debts, including any enrolled debt in a debt management plan
· Make at least minimum payments on time
· Use money management tools or apps to stay organized
· Keep a buffer in a dedicated account for emergencies
· Understand that fees vary between providers
· Avoid closing accounts unless part of an official debt management plan
· Stop incurring new credit card debt and make being debt free your goal
It’s easy to feel trapped when you can’t make your car loan payment, but there are solutions. Whether you're dealing with credit card bills, unsecured debts, or other forms of consumer debt, there are numerous debt relief options and debt management tools designed to help you avoid repossession and regain control.
A combination of proactive communication, budgeting, and possibly working with credit counselors, debt relief services, or enrolling in a debt management plan can get you back on the road.
If you are worried about your auto loan or any other debt, don't wait! Contact Credit.org and talk to one of our expert debt counselors today.
