My husband cannot afford his car loan; should he repossess his car and affect his credit?
My husband was laid off and is receiving unemployment. He has a $700/month car payment which we can not afford. His loan is now worth more than the value of the car. Should he voluntarily repossess his car and take a hit on his credit? His credit is bad already. What are your suggestions?
Hi, I am sorry to know about you and your husband's sitaution. Repossession of a car can have a negative implication to one's credit rating and can stay on record for seven years. In addition, if the loan amount is greater than the value of the car, the borower will be responsible for the balance and it will stay on record as amount due.
You may want to see if you can refinance the loan or trade in for a cheaper car to alleviate the situation.
If not, voluntary surrender maybe a better option: You can see if the lender is open to negotiating a better payment plan for the balance on the loan.
If none of this works and the car gets repossesed then apart from having to pay off the balance as soon as possible you will also have to rebuild your credit by managing the rest of your debts well.
All the best.
So sorry to hear about the situation. These unforeseen financial problems can really be the pits.
You should, of course, do your best to avoid defaulting. That said, you certainly don’t want to take on another loan that might make the situation worse. There’s also the question of the importance of transportation - if you keep the car and miss a payment, could that help your husband get a new job that will cover the cost of the loan going forward?
There’s a reasonable chance you’ll be able to rework the terms of the loan. Your best bet is to work with the lender and/or dealership; it’s not in anyone’s interest for your husband to stop making payments and take a hit on his credit score. If your husband is able to make some form of monthly payment until he gets back to work, you might be able to refinance and get terms that will help you avoid creditors. The only way to find out is by going to the lender and asking.
Keep your head up and investigate all your options. Ask for advice from friends, family and on forums like this one. There’s no easy answer I can give right now, but if you put in the effort and exhaust all options, things will be OK.