US Consumers Struggle with Auto Loans, Credit Card Debt

[Jul 28, 2009.]

 

The Wall Street Journal reports that US consumers are continuing to struggle with auto loans and credit card debt. According to the American Bankers Association, defaults on direct auto loans rose from 2.03% in the fourth quarter of 2008 to 3.01% in the first quarter of 2009. Unemployment is cited as the primary reason for defaulted auto loans.  What can you do if you lose your job and can't pay your auto loan?

Car as Collateral: Don't Risk Repossession

The worst thing you can do if you can't make auto loan payments is nothing. Ignoring the situation won't make the problem go away, but your ride may go away. Auto loans are secured loans, which means that your car is collateral for your auto loan. If you miss payments, the auto loan company can and will take your car. Once your car is repossessed, you'll have to pay additional fees and costs to get it back. This can amount to hundreds of dollars and is definitely not worth it. Instead, contact your auto lender as soon as you know you cannot make payments.

• Have your account number handy


• Calmly (this means no yelling or cursing) explain why you cannot make payments, and tell the loan representative what you can do. Offering to send some money shows good will. It's not the loan representative's fault that you've fallen on bad times; be courteous and work with the loan rep to find a solution.


• Ask how your lender can help. In order to get a workout plan or loan modification, you'll have to commit to a specific date for bringing your auto loan payments current. 


• If you have a loan through your auto manufacturer, ask about incentives or assistance plans. Your lender may be willing to adjust your payment due date, and add past due interest to your loan balance.


• Don't make promises you cannot keep: Don't commit to any agreement you can't keep. Promising to send funds and not doing it may buy you and your ride a date with the repo man.

You've probably heard about how cars instantly lose value once they're driven off the lot. Your lender is in the business of making auto loans, and would prefer to avoid repossessing vehicles. Working with your auto loan company toward resolving problems can benefit everyone involved.

 

About Author:

Peter Andrew has been writing about -- and for -- business for more than two decades. For the last couple of years, he has found himself increasingly specializing in the U.S. financial sector.