How to lower your monthly car payment
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When you find that your budget is tightening, you begin to analyze your spending in an attempt to ease the proverbial debt loop. You will find that some expenses are mandatory, some without cheaper substitutes, and some things…
When you find that your budget is tightening, you begin to analyze your spending in an attempt to ease the proverbial debt loop.
You'll find that some expenses are mandatory, some don't have cheaper substitutes, and some things you can do without until you get back on your feet and in a better financial position. Among the must-haves are you still need to pay your rent or housing, pay your utilities and – yes – shell out some cash towards your monthly car payments.
While you could make the argument that a car is a luxury rather than a necessity, that argument is likely to go unheeded. These days, we depend on personal transportation - not as a frivolous supplement, but often as a means to do our job and earn the money necessary for a comfortable life.
While you don't have to get rid of your car to ease your financial burden; There are several ways you can use to reduce your current monthly car payment to better fit your budget.
Method 1 of 4: Consolidate your debt
If you have multiple debts in addition to paying for your car, it's best to consult with a loan officer about loan consolidation. This consolidates your many debts into one payment that's easier to deal with in terms of your budget, and often reduces the amount you'll need to pay each month.
With this method, it is even possible to lock in a better interest rate than before.
Method 2 of 4: Refinance a car loan
Loan consolidation isn't the only way to get a lower interest rate and ultimately lower your monthly car payments. You can also refinance a car loan.
If the economy is such that interest rates are generally coming down, or your credit has improved significantly since you first financed your car, this option is worth exploring.
Step 1: Check your loan balance. Just like you'll need a certain amount of capital before you can refinance your mortgage, this option is only an option if you've been paying for your car for a while.
Your loan balance must be less than the current value of your car.
- FunctionsA: To determine the value of your car and compare it to the amount you owe, visit the Kelly Blue Book or NADA websites.
Step 2. Limit procedures that require access to credit history. When exploring consolidation and refinancing options, keep in mind that while you should be comparing rates from multiple lenders, the frequency with which you access your credit history affects your credit score.
Because every time a potential lender asks for your credit report, it negatively impacts your score, limit your "purchases" to the best options, such as a banking institution you use regularly.
Method 3 of 4: Switch to a cheaper car
While it may not be possible to live without a car, you can significantly reduce your monthly payments by simply buying a cheaper car. This requires you to sell your current car to pay off the loan and use the extra money to make a down payment on a lower value car.
Although this method may seem extreme, it is very effective in making your monthly budget less intimidating.
Step 1: Sell your car. For this method to work, you will need to sell your car for more than the balance of your car loan.
While websites such as NADA and Kelly Blue Book may give you an estimate of the value of your current vehicle, this does not necessarily mean the actual sale amount you will receive. To get a better idea of what you can realistically get for your car, look at local print and online ads and look at the selling price of vehicles like your car.
Step 2: Get a cheaper car. This method works regardless of the interest rate, as the loan for the second car will be for a lower total amount than the loan for your previous car.
- FunctionsA: If you are planning to buy a used car, hire a professional mechanic such as from AvtoTachki to inspect before buying to avoid costly repairs in the future.
Method 4 of 4: Negotiate lower payments with your lender
Some lenders have a policy whereby payments can be reduced for a short period of time when the lender has experienced a significant change in income due to extreme circumstances such as health problems or job loss.
Step 1: Contact your dealer. You will be more likely to succeed in negotiating new car loan terms if you financed your car through a dealership. Going to a dealership is beneficial to your business simply because there is less red tape and you are likely to deal more with people who know you than with the corporation as a whole.
Step 2: Consider the long-term impact on your finances. Keep in mind that if you manage to negotiate lower payments, the total amount of interest paid will be higher and the repayment schedule will be longer. So if you expect your financial situation to improve in the near future, this may not be the best choice in the long run.
Regardless of which method you end up choosing, the good news is that you don't have to be car-free to make your monthly car payments more manageable. This means that you will still be able to commute to and from work, or perhaps even continue to do work that depends on having your own transport.
Weigh the pros and cons of the options available that are unique to your financial situation, and one method is likely to be the best way to reduce your monthly car payments.
