When your credit isn’t very good to begin with and you find yourself in a position where it’s becoming increasingly difficult to make your car loan payments, what options do you have?
We spoke with John Ulzheimer, president of consumer education for Credit.com, about the impact on your credit score if you stop making your auto loan payments and/or let the vehicle become repossessed.
Here is a sample of Ulzheimer’s tips to consumers who are struggling to make their car loan payments, but don’t have high enough credit scores to refinance the auto loan:
- Repossession is an option, but is more costly than you think. The lender will make you pay the remaining balance of the car after they sell it, auction costs associated with selling it and any costs from repossessing the car itself.
- A repossession will stay on your credit report for seven years. It will make it very difficult to get a decent auto loan rate on any car in the near future.
- If you’re trying to improve your credit score, a repossession, whether voluntary or involuntary, will not only lower your main credit score, but will also lower your auto loan specific credit score, which is very important in obtaining a future car loan at a reasonable interest rate.
Look for more information from John Ulzheimer and other industry experts about the pros and cons of different options for those with bad credit who need to lower their monthly auto loan payment soon in an upcoming in-depth feature story.