I’m falling behind on car loan repayments. What should I do???

Well, the first and most important message is to not bury your head in the sand.

Paper with default written

Don’t bury your head in the sand

In general, it is in the best interest for lenders to keep you on track to assist you inpaying off your car loan. This is due in part to the fact that lenders aren’t car yards, and don’t wish to have the burden of selling your car at auction should you default on your loan.

For this reason, lenders will often be able to negotiate an action plan with you so that they can recoup your delinquent repayment. This may involve extending your loan term as to lower your recurring repayments, allowing for a double payment (if this is within your means), or allowing you to pay the difference as a balloon payment at the end of the loan.

Please note that not all lenders offer these action plans. It is best to communicate with your lender to discuss your loan contract as they will be able to give you a better understanding of their options.

What if I’m falling behind by a small amount?

Look at your outgoings and incomings…

A little known fact is that millionaires “diligently attend to the ebb and flow of their bank accounts” according to Thomas J. Stanley and William D. Danko (Authors of The Millionaire Next Door).
By actively monitoring your bank account, you will start to notice spending trends that may be eating in to your ability to afford your car loan repayments. These may include meals out, shopping sprees or even day to day items such as fizzy drinks and coffees.

Cutting out one or more of these luxuries may be the difference of being able to afford your repayments and losing your mode of transport to the lender. It really comes down to priorities, would you rather eat at a restaurant each week or have the convenience of getting from A to B in your own car?

Note: Remember that having your car repossessed doesn’t mean that you are free from repayments. The lender will sell your car at auction, often for a much lower price than the market value, and the difference between market value and the price sold will be a balance that you are required to pay to the lender.

What if I come under hardship?

The good news is that lenders are required to have a hardship provision. These policies are put in place to cater for unexpected financial difficulties, for example the 2011 Brisbane floods.
Once again, if you don’t bury your head, you can discuss your situation with your lender and hopefully come to a resolution that is beneficial to both parties.

If you feel that communicating directly with the lender is difficult, you should contact your financial consultant from 360 to help you liaise with the lender on your behalf if you wish.

What if I can’t see an end to missed repayments?

In the unfortunate event that you absolutely can’t afford your repayments, there are a few options.
The first is to sell your car. In most cases, the amount that you can sell your car for will be more than the amount that the lender will get at auction if they were forced to repossess it. In these situations, every dollar counts and time is of the essence. Place an ad on online or in your local paper and be proactive but make sure you have cash to pay any shortfall between the sale price and what you owe!

If you are having difficulty selling your car and you know that your car will be repossessed soon due to missed payments, an option is to voluntarily surrender your vehicle to your lender. This is similar to having the car repossessed however it will look better on your behalf and may allow the lender to show some leniency on your credit file.

Remember that life isn’t always smooth sailing and hardship is a reality. Don’t over extend yourself when taking out a car loan and don’t hide away if you are facing financial difficulty. 360 are always here to help you liaise with your lender and are only a phone call (1300 361 360) away.