Assistance getting out of a car loan.
There are times when a financial crisis prevents a borrower from making their monthly car loan payments. The hardship is normally short term in nature, but even that time frame can put tremendous pressure on the family. People are often faced with difficult choices on whether to make a payment on their car note or pay other bills. If and when this were to occur, there are steps that may help the consumer get of of the obligation on their automobile loan.
The steps will really be effective when a refinance doesn't help. That approach should always be the first option, as some borrowers will either reduce the monthly interest rare on a car loan or extend the length of it. Both of these approaches make the monthly payment more affordable, so refinancing or modifying the loan should be explored first.
Ask for an abatement on the car to make it more affordable
Some lenders have been known to modifying the car note by delaying the date of when a payment or two may be due. This has been done by finance companies that sell GM as well as Ford cars or trucks. Many banks, including Wells Fargo, Ally, and Capital One also offer abatement. Other companies such as JPMorgan Chase have also renegotiated the terms of the loan as well. It is always a good idea to ask.
When trying this, it can be very beneficial to ask for that abatement as soon as possible, before a payment is even missed. This is when the lender or bank will be most likely to provide the borrower more time. If the owner of the automobile has a valid reason for struggling, and a plan to get back on track in short order, an abatement will given them the time they need.
Some borrowers have asked for the ability to miss one or two months worth of the payments on their loan. They then tell the bank that they will make it up an the end of the contract. An example of how this can help the consumer get out of some of their loan payments is as follows.
Say the owner missed work for a couple weeks, so they had a one time reduction in income. As soon as this occurs, they can call their financing company. The lender may allow that months payment (or maybe even the next two) to be missed, but they will still require the money to be paid either over the course of the year. Or maybe they will add the two months on the end of the car loan.
If it is decided to try to modify the existing contract to get relief on it, be prepared with documentation. To make a serious attempt at getting help from companies such as Honda, Ford, or Toyota, their financing arms will require that a full assessment takes place. This will involve either a phone consultation or a formal meeting with a representative from the lender.
The individual should bring a copy of their budget, monthly income, and expenses. They should clearly show the amount that they can afford to pay on the car note. There should also be proof of what the hardship is, whether it is a medical issue, short term reduction in work hours, or another reason. The more prepared and detailed the borrower is the greater chance they have to get of of the existing automobile loan.
Also, it may be beneficial to make a “good faith” payment on the car loan. Maybe pay a portion of what is due so the bank knows you are willing and able to make the effort. If there is a modification finally agreed to, or if they eliminate a portion of the obligation, then get any deal in writing.
Ally and other car financing companies can benefit from a automobile loan modification or abatement deal as well. As if a bank such as Wells Fargo were to repossess it, the car or truck is more than likely to be sold by them at some auction or repossession sale. This often provides the car financing company less money than the book value, so it is often in their best interest to work with the borrower on some type of solution to help them.
The phone numbers to call to try to get out of the payments on the loan include Ally Auto at 1-888-925-2559. Wells Fargo can be reached at 1-877-246-1015. Other banks to try for an abatement include Bank of America (BOA) at 1-800-215-6195, Capitol One (phone 1-877-733-4227), or JPMorgan Chase at 1-800-336-6675.
Sell the car to get the loan out of the borrower's name
This will only help in situations where there is some form of equity available. So the person will need to research that value first, before exploring this approach. As an example of how it will work, if the Kelley Blue Book value of the car is $10,000, and the balance of the loan is $4,000, then there is $6,000 of positive equity. This means a sale may be an option.
One issue to be aware of is that the longer the length of the loan originate the greater the chance of their being “negative” equity on the account. This means that there is more money is owed than the car is worth. With more people using 5-8 year long financing agreements, it can be very difficult for them to get help as it is very difficult to have a positive equity in those cases. The shorter the payment terms, the more likely selling the auto will be an option.
If a sale looks possible, then contact the lender. They need to be involved in the process. All of the parties involved in the transaction (lender, buyer, and seller) will need to close out the loan with the existing bank. Or they will all need to be involved in the transfer of the title or financing agreement as well.
If the loan is paid off using the proceeds of the sale, this will usually be done using the money from the contract agreed to by the buyer/seller. So all deal terms need to be clearly defined in order to get this approach to be successful. Also a contract documenting the transaction is required.
Turn over the car to the bank
If there is no way for the owner to get assistance on their loan, they can call the lender and ask them about turning the car or truck in in order to get out of the financial commitment they have. This will get them out of the financial obligation to continue to make monthly payments on it. If someone is pro-active, it also saves the lender time and money from having to repossess it.
One barrier to doing this is the family no longer has an automobile to make it to work or school. Not only do they then have no means for transportation, it can impact them over the long term as they may not be able to take out a new loan for an extended period of time This can cause a major problem for the household. But there may be ways to get help, as some charities have free car programs.
Communication is key here. Anyone going down this path needs to be sure to call the lender, or if they are local, stop into their office. Ask them to see if by turning the car over to them if they will not reduce the borrower's credit score. Some banks, including Capital One, will not report this to the bureaus if the individual is pro-active in their communication and makes it easier for the lender. Also, be sure it clears any obligation that may be due for late payment fees and that the loan itself is negated.