The Covid-19 pandemic brought insurmountable and unimaginable suffering in all spheres of our lives, but not as much as on the financial front. Millions of people have lost their source of livelihoods, with job cuts and businesses across the board experiencing losses and shutdowns. One of the financial aspects significantly impacted is to do with loans. People who took loans before the pandemic are having trouble with their financiers due to being unable to meet set time limits. With no absolute direct source of income, many people cannot meet their financial obligations, especially paying their loans. Auto loans are greatly affected, suffering non-payments, especially after the coronavirus was declared a global pandemic.
This article delves into the possible measures you can take if you face difficulties in paying your auto loan and failure to meet the set time limits.
This insightful feature offers you options on what you should do when you are late in meeting your auto loan obligations keeping a good credit history despite everything with your financiers. While it is possible to take advantage of the new set accommodative measures the lenders have instituted as a result of the pandemic, there are other viable options that you can choose in making your auto loan less of a burden to you.
Getting help with your car loan
The United States legislative passed the Coronavirus Aid, Relief and Economic Security (CARES) Act in March, which was aimed at giving a financial boost to citizens suffering from the impact of the coronavirus pandemic. Other areas covered in the Act included on the business front by providing mortgage loan forbearance options, which was a relief to many people. The Act also came as a relief to federal students whose loan repayments were automatically suspended.
Regarding auto loans that do not receive a government guarantee as compared to the other types of loans, auto loan borrowers were inevitably left out of the CARES Act. Some practical options that would provide relief for auto loan borrowers during this trying and difficult financial times include the following;
- Determining your loan to value ratio- one of the first steps to take when facing challenges is understanding where you stand with your loan repayment. Determine your car value and the outstanding loan balance. Used cars have depreciated following the current market standing, making the situation even direr for borrowers. Understanding the current market value for your vehicle will give you more bargaining power with your borrower if the car value is more than the outstanding loan balance.
- Have a conversation with your lender-approaching your lender on a one-on-one basis. Explain your financial position creates a good rapport between the borrower and the lender. Several auto lenders are currently providing their clients with financial aid in the form of loan forbearance occasioned by the Covid-19 pandemic. Some of the measures include giving breaks on monthly payments to the borrowers for some time. Other measures include waiving late repayment fees. The help given to borrowers varies from lender to lender, with each borrower’s case assessed including the interests, repayment and credit history, the period of expected delay, and how each borrower qualifies for the provided reliefs. Borrowers should keep in mind that while the loan can be deferred for some time, the interest on the loans will continue to accrue and that the accumulated amount will need to be paid later once everything goes back to normal.
- Downsizing is a likely option- if you are facing challenges in your loan repayment, a reduction is one of the possible options. If you are having difficulties in making monthly repayment to a seemingly expensive car, you can consider selling it, buying a relatively modest car, and offsetting your outstanding loan balance. Although selling your car and buying a new one might take some time, coming into agreement with your lender for a loan deferment while you work on selling the car is a viable option. Selling your car to a private buyer is much more profitable and comes with less hustle than selling it through a car dealership.
- Refinance your car loan- one of the likely options in staying afloat and being able to meet your loan obligations is refinancing your auto loan. Refinancing is essential in saving money and interest, ensuring that your monthly loan repayments are significantly reduced. The process of refinancing your car loan involves qualifying for a lower interest rate than you currently pay. The other option is extending the car loan repayment term exceeding the original loan terms. It is important to note that to make car loan refinancing viable. You need to have an income and have a considerably good credit score. There is a need to compare rates and loan terms with other lenders to get the best refinancing deal.
- Check out your car insurance- while your car insurance is not directly tied to your auto loan, it presents an excellent opportunity to help you save. You can considerably reduce your auto insurance premiums by speaking with your insurer on the possible ways to lower the monthly rates. There is also a need to change the existing policy to one that is favorable without unnecessary coverage. You can also check out other convenient car insurers with fair payment terms.
- Be innovative in saving and making money- if you are facing challenges in meeting your car loan repayment obligations, and it is only wise that you find measures to help you stay afloat. One of the steps includes cutting down on your budget and freeing up some money to keep up with your loan repayment. It is also crucial that you find possible means of getting money fast, like selling off unused household items or getting temporary jobs to get you going and help you repay your outstanding car loans.
You must make all arrangements to ensure you are in good standing with your lender, the current economic challenges notwithstanding. Stay put and choose an option that suits you perfectly regarding your auto loans during these problematic moments occasioned by the Covid-19 pandemic.