How to Reduce My Current Car Payments
When it comes to prioritizing what debts to cover in the face of a financial crisis, your car payment should only come second to your mortgage/rent and utilities. Having your car repossessed will only worsen your financial situation, not to mention your credit. Reducing your car payments can be tricky, but you do have options.
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Instructions
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Ways to Cut Down Your Car Payments
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Try renegotiating the terms of your loan with the lender. If you have been making payments on time and your credit is good, you are in a better position to ask for a change in terms than if you've been late paying the monthly installment. Ask your lender to extend your loan for another year or two, and see if the interest rate can be reduced.
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Trade in your car for a less expensive one if your loan is through a car dealer. You are better off driving a $9,000 pre-owned vehicle that you can afford than a brand-new $18,000 car that's causing financial stress. Since the dealer will make less money on the new loan, you might get stuck with a higher interest rate.
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Apply for a personal loan to pay off the car. This scenario comes with three advantages: You will get a lower interest rate since banks tend to lend money for personal loans at a lower rate than they do for automobiles; you will own your car outright; and you can reduce your insurance premiums to minimum coverage. (People who have car loans are required to have full coverage for their vehicles, which means higher insurance costs.)
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Ask your co-signer for help. He agreed to share responsibility for the payments when he signed the contract. See if she can pay more than half or all of the bill for now. For the sake of your relationship with the co-signer, make every effort to uphold your end of the deal. Offer him something in return such as free child care, housekeeping or house repairs, or offer some other service that would financially equate to the money he is fronting you.
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Cut a deal with a relative, a trusted friend or a neighbor who needs a car. Make an arrangement with him to share the use of the car and the cost of the payments, gas and repairs. Get it in writing and notarize it. The car will legally be in your name (you can't sell it since the bank or car dealer owns it), but your friend will have a valid document (and legal backing) that shows he is entitled to using it per the terms of your agreement.
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Find a second form of income. It won't reduce your payments per se, but you will be able to cover them easier. Better to give up a few nights or your weekends in order to improve your long-term future. Even if you only make $10 per hour at a coffeeshop, that extra money quickly adds up.
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Tips & Warnings
In the future, make the biggest down payment you can on a car. You will save more on interest and payments in the long run.
