Automobile debt and home mortgages are two largest debts most people carry. For some consumers the effect of auto debt is sometimes worse than credit card debt. You actually pay for an overpriced product with expensive financing. Later, when you think of a newer model, you trade it in and purchase that newer one with a new loan.
You pay interest on not only the purchase of the vehicle but also the insurance, the warranty and any other items for a thing that depreciate in value. What’s more, you owe more for the car than it is worth because the money you get when you sell it is not enough to pay off the loan.
The Risks of Missing Your Car Debt Payments
As buying and owning a car is expensive make sure you have enough money set aside to make the payments. If you are finding it difficult to make the monthly payments then you might need to downgrade to something more affordable because missing your car payments can create all sorts of problems.
If you miss your payments your lender is legally entitled to repossess your car without getting a court order and without warning. The repossession will then be recorded on your credit report and will stay there for the next seven years.
Unfortunately, your problem doesn’t stop there. Once your car has been repossessed your creditor will sell it to help recover the outstanding amount of the loan. If it is sold for less than the amount owing on it, then you will be liable to repay that deficit to the company.
Get Out of Automobile Debt
If you are struggling to make the automobile debt payments consider what alternatives you have to reduce the debt. That might mean selling your expensive motor vehicle or contacting your lender to refinance the vehicle over a longer period with little less repayments.
If you can get rid of your expensive vehicle you will have enough funds to pay cash outright for a lower grade but reliable vehicle then that would have a huge impact on your monthly budget.
Your lender might also offer you a suitable arrangement to pay off your outstanding debt. This could give you enough time to sell the car for paying off the loan. If you can manage with one car than two, then offload one and use the money from that to reduce debt.
Now that you know buying a more expensive car by borrowing more is not a wise decision. Focus on accelerating the payment of your car debt payment first. Once it is paid off, keep making the payments into your own account to buy your next auto. And the next time you buy a car, avoid buying one just to impress friends, family and neighbors.