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SHOW GOOD FAITH BY CONTACTING YOUR LENDER BEFORE THEY HAVE TO CALL YOU ABOUT A MISSED OR LATE PAYMENT. COMMUNICATION IS CRITICAL TO ENLISTING THEIR COOPERATION.
If there is equity (value above the amount owed) in the vehicle, the car can be sold. The lienholder will release the title if the principal is paid off. The consumer can then use the difference to buy a more affordable car.
DUE DATE CHANGE
Sometimes changing the payment due date will allow for accumulation of the necessary
amount due to avoid delinquency. It must not postpone the current due date by more
than 29 days, or it is considered a deferment.
DEFERMENT
Some lienholders will allow the borrower to defer payments for up to three months.
The lienholder will require the borrower to pay the interest on the portion which is
deferred and will extend the term of the loan by the number of months deferred. Not
all lienholders offer this option, and some may not offer this option more than
once. It is possible this will have a negative impact on the credit report.
REFINANCE
Check with the lender to see if the loan can be rewritten to extend the term in
order to lower the monthly payments. You will pay more for the car by doing this,
but it may save the car in a crisis.
TRANSFER OF EQUITY
This is a loan assumption -- someone else takes over payments. Be aware that you, as
the initial borrower, are still ultimately liable. This is similar to co-signing. Be
very careful with this option with someone you don't know.
[IF ALL ELSE FAILS]
VOLUNTARY SURRENDER
In extreme cases the consumer can voluntarily give back the vehicle to the
lienholder. This will eliminate a payment if the vehicle is sold by the lienholder
and the sale is enough to pay off the balance. If the sale is not enough to pay
off the balance, the borrower will have a deficiency balance to pay. The consumer
will have to make arrangements to pay this balance off or settle the account. If the
consumer does not pay the deficiency balance, the lienholder may sue for a money
judgement.
