There are things we know we don’t need to tell you but here we go: life is expensive. Loads of people find themselves not being able to afford their vehicle payment at some point. It happens, but there are always options, so take 10 deep breaths, put your head down and have a read.
Few people have been immune to the whirlwind of external factors that have impacted our bank accounts this year — find some comfort in that. Whether your car payments are just starting to creep into the back of your mind or you are right on the brink of having to sell your car, there are things you can do to protect yourself.
What happens if I just… don’t pay
Not good things, let’s start with that. To get the scary stuff out of the way: not paying your vehicle payment is a breach of contract. Firstly, your credit score becomes weaker followed by the repossession of your car if you still miss payments. The worst repercussion: you still owe money even once your car is long gone. Debt city, population: you. Even if some of the options are difficult, they’re better than ending up here, so let’s get down to it.
Read this: How to Save Money on Your Car Loan: Our 5 expert tips and tricks
Get your bank on board
When financial crises strike, it can be easy to start thinking the banks are the bad guys. It would be a missed opportunity, however, if you didn’t approach the money experts who probably have a lot of viable solutions for you. Go and talk with one of your bank’s financial advisors about the services that are already included in your plan and about any additional value services that you could consider. Credit protection is a bank service you should opt for while you can, safeguarding you from running into debt when external factors come into play (remember the aforementioned whirlwind?).
Conduct a budget overview
Here’s the thing: the only way around this situation, is through. The more you run from your money, the more your money runs from you. You may feel like keeping your eyes shut will make things suddenly fall together but you need to be a bietjie brave to come out on top. Having a firm grasp on your money means knowing exactly what comes in, what goes out and where it goes to.
Read next: 11 Simple Ways to Save Fuel that Really Work!
Refinance your vehicle
Okay, so maybe you need cash flow immediately and we know that can be because of a variety of reasons — a decrease in income or an expensive emergency that was just out of your hands. This route will help you pay off your loan faster by extending your loan period. For example, you could take out an extra 2 to 4 years on your loan which should substantially lower your monthly vehicle payment and give you a little breathing space to get your finances back in order. In some cases, you may even end up paying less for the entire loan because you have the opportunity to lower your interest rates.
Refinancing your vehicle does have some potential cons — like interest rates that suddenly go through the roof. Make sure you fully understand how your interest is being affected when you decide to refinance your car. It can also be a costly affair but worth it if done correctly.
Make the trade
Whilst you’re talking with your bank, ask them about trading in your vehicle and to point you in the direction of a reputable dealer if you don’t already have one. Trading in for a vehicle with a lower value means you’ll be paying lower monthly instalments and hey, wheels are wheels at the end of the day so don’t be too sad to say goodbye to Big Red if the day comes.
Related: Is it time to swap my car for a smaller one? Cutting back on your car expenses by downsizing
Don’t be scared to sell
This option always makes people nervous, and it could be because it comes with a big sense of loss, but selling your car is a far better route than missing your vehicle payment and falling into debt. Again, chat to your bank about finding a reputable salesperson if you don’t have one already.
Who knows, maybe selling your car is the fresh start you need to get back on your feet.
Tips to keep in mind
- In an ideal situation, you want to make sure that you owe less than the total value of your car.
- Keep an eye on those sneaky interest rates.
- The sweet spot: the shortest loan term combined with the lowest interest rate.
The hardest part is over: facing the facts and getting yourself prepared for what to do if you can’t pay your vehicle payment. You’ve done a fantastic job so far! From the Oneplan Team, we hope the process is smooth sailing from here on out.
Your Insurance Family,
Oneplan
