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What to do if you Can't Afford the Finance Repayments

By: Tracy Wilkinson - Updated: 25 Aug 2019 | comments*Discuss
 
Finance Finances Loan Car Loan Loan

Millions of people every year stretch their budget to take out personal car loans and finance deals so that they can purchase a new car. This can be an excellent idea if drivers have the time to shop around and make sure that they are getting the best deal around - with a good competitive interest rate (preferably 0%) and a reasonable deposit and monthly payment structure.

However, all too often motorists take out a loan then find that they cannot afford the loan repayments - sometimes because they borrowed more than they could afford to repay, and sometimes because their circumstances have changed beyond their control - and it's just not realistic for them to manage their monthly payments anymore.

So what can you do if this happens to you? This is a question faced by many people and it can be a very scary thing to think about – no-one wants to think about the prospect of losing their car.

Should I Stop Making my Monthly Payment?

While it can be a very tempting option, it's not a smart one - it will affect your credit rating and more importantly - it doesn't affect your obligation to pay one little bit. It ends up with you owing more money - with late and missed payment charges, big interest hikes, charges for reminder letters, and if the bank ends up repossessing the car they'll charge you for collection, admin costs and auction costs. Even if they sell it and put the funds against the debt they'll probably sell it way below its worth at auction - and you'll still owe them the difference at the end of the day so they'll keep chasing you until you speak to them. You don't want bailiffs turning up, so speak to them and let them know what's going on.

Work out your Figures

What you need to do first is sit down and work out exactly what you owe on the car. Ring the company you borrowed the money from and ask them for a settlement figure. When you know what this is, you can start to do something about it.

Trading Down

You might want to think about trading your car in for one that costs less. The dealer who sells you your replacement car will set you up with a loan that covers the full amount owed on your initial loan and whatever you need for the new (to you) car.

By doing this you can bring your payments down and/or spread them out over a longer period of time, reducing the immediate pressure on your finances - but do remember, you're paying considerably more for a car with less value - so you really need to consider whether or not that is something you want to do.

Selling Up

You may have decided that you don't want to have a car anymore or that you can't afford to run one. If this is the case, then have a look at cars of a similar make/model/condition to yours and see how much the going rate for them is. Also check Parkers and Glass's guides to see what the current list price is.

If you do decide to sell the car and you can't raise enough funds to clear the whole settlement you may be better off getting a small personal loan to make up the difference and clear the finance.

If you're only borrowing a small amount you should be able to get a favourable interest rate and you can bring your monthly payments down quite a lot doing this. Of course you do need to make sure that you can afford the second loan payment!

Also make sure that you inform your finance company before you make any moves to sell the car as it is legally their property and may show up on searches that potential buyers pay to have carried out.

Handing the Car Back

If you have a car finance arrangement then you also have another option that isn’t available to people with a personal loan. In most car finance deals there is a clause that states that after a certain amount has been paid (usually around 2/3 of the total price) or after a certain amount of time has passed with the loan account being managed in good order – with payments made on time, etc, then the borrower has the right to return the car to the financier.

The lender will do a number of checks on the car, arrange the admin, and then take the car and resell it – leaving you arrangement free without any further commitment. If for any reason your car isn’t worth as much as the remaining loan amount then the lender may take the car back and leave you with a small balance to pay – which is frustrating because you’re paying for something you don’t have any more – but it is a legal way of getting out of finance deal that you know you’re not going to be able to manage with.

Communicate

Most importantly, communicate with your lender. If you’re in financial trouble then they are there to help you. Write to them and explain your circumstances – some lenders will reduce payments for a few months to allow you time to get back on your feet. If you have no joy with them, then visit your local CAB and get some specialist advice.

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[Add a Comment]
I bought a van for my partners business as he had poor credit. It’s in my name and now I want the van back as I don’t think he’ll pay back the loan I took out for him. What are my rights? Will this affect my credit rating etc?
K - 25-Aug-19 @ 2:22 PM
Want will happen if I miss a payment or rheres not enough money in my bank for that direct debit to go out
Midge - 5-Aug-19 @ 11:30 PM
I got a car on finance for my son he stoped payingthe payments I still owe £6035.76 iam on a pension and 72 years old I can't afford the paymentswhat should I do I pay ,£20 .00monthlybut Barclays keek sending me letters the full monthly payment is ,£347
None - 7-Jun-19 @ 3:52 PM
Very nice informative article.It is really helpful to me. The information that you have shared is really interesting. Have you heard that A write-off is a reduction of the recognized value of something. In accounting, this is a recognition of the reduced or zero value of an asset.
stanharris - 14-May-19 @ 11:37 AM
Hi, I have recently recieved a letter stating as I defaulted on my payments the agreement has been terminated and the vehicle will be collected. I am now able to make the missed payments however would I have to enter into a new finance agreement or will the old one be resurrected?
Daniel - 11-May-19 @ 6:52 PM
I finance car in 2017 and never misses a payment. In April 2019 unfortunatrly I was diognosed with blood cancer and doctors stopped me to do work for more than 6 months due to chemotherapy. What option are available for me to get rid of paying monthly payment over finance. I also need car but this car cost me too much and can't afford.
Nasar - 10-May-19 @ 10:21 AM
Hi looking for some help i have a car on finance only had the car a month or so and due to other monthly payments increasing im struggling monthly by keeping the car is there any options i can do as i also cant afford a big settlement figure or volentry termination fees
John - 8-May-19 @ 12:59 PM
Hi i have a car about 5 month then now i struggle to pay for the finance is any advice please what shall i do with it
Parsa - 15-Mar-19 @ 2:30 PM
I have car finance, ive made a few late payments, i would like to sell to a dealer and refinance on a newer car. My credit rating isnt the best. What are the chances of doing this?
Trace - 27-Feb-19 @ 8:30 AM
Hi got c max in may 2018 for friend on finance in my name and they paid every month in my bank. Now person has lost job and can’t keep car. I already have car on finance for myself at £229.05 month.i can’t get loan to pay it off and can’t sell as £8500 left on it, get half that if sold it. Help any suggestions
Pat - 18-Feb-19 @ 7:44 PM
Hi I have an HP deal and I have been made redundant.I have been paying the deal since June last year and in order to come out of the agreement I would need to continue paying for another 2 years help!!!
Lima - 25-Nov-18 @ 9:12 PM
Hi I have a car on finance for 17k and I’m thinking of giving it back as I’m struggling to pay back the repayments I’ve only had it 2 month so I’m just wondering what would happen if I did an if id after pay anything.
Gaz - 1-Nov-18 @ 11:14 AM
Hi got car on finance over 5 yrs for friend. I already have car on fiance from same dealer. 5 months on and they can'tafford it and I'm stuck with it. Got settlement figure, can't afford it even if sold car. What do i do.....
Pat - 24-Oct-18 @ 2:43 AM
I have a finance with you for £13,532 as a settlement figure but my van is only worth £9,500 I’ve only had the van for 5 months but I have just lost my licence and can no longer afford the payment as I have lost my job for not being able to drive is there anything I can do ?
Jason - 19-Sep-18 @ 2:06 PM
Bought car on finance ( beyond my means, stupid) 5 years agoI’ve never missed a payment. I was confused at sale and went back again for explanation on amount. I am due to retire soon and cannot afford payments on state pension but need a car. Have paid back 4/5 of amount what are my options?
Ibiza - 18-Sep-18 @ 3:10 PM
Hi iam going in to hospital I have a rare illness I will be off work for a while iam not even sure if I will be driving again how do I stand on HP on the car I have not had the car a year yet .
Archie - 11-Sep-18 @ 9:06 PM
Put deposit down on a car at a dealership and signed for finance but decided a day later i dont want it. I havent actually got the car or brought it yet hust agreed with the finance. How do i get out of it as i dont want it anymore.
Clo - 16-Aug-18 @ 7:24 PM
Hi I need some advice please.I'm in arears on my car finance due to change in circumstances.But recently situation is getting better and improved and I've been in contact and communicating with my finance company,I've asked for a payment plan that works for me to clear the arears but they refused.What more can I do please?
Gbdg - 30-Jul-18 @ 7:57 PM
Advice needed please I have a van on finance was taken over 3 yrs and ends in Jan of next yr unfortunately the desle van is no good mow and a cilinder has gone I've had it checked out by 3 gauges and all said we'll cost far to much to fix and with nothing I've contacted my fiance company and explain this to them asking to have permission to scrap but stated no I've had to get another car on finance because of my job and now stuck with two finance and need to stop payment on the van or get them to take it away We're do I stand as a customer on this please as struggling with a van I cannot use Thankyou
Elaine - 12-Jul-18 @ 6:39 AM
my retired fathers name is on a huge car finance deal for my brother. My brother has Been paying for 12 months, now brother has lost his job, no one to pay finance. What do I do? Car will need returning to dealer, finance outstanding will bankrupt my elderly father. Any help/ suggestions urgently needed?
Ts - 28-Jun-18 @ 4:08 AM
I have a car on finance to pay over 5 years. I’ve payed 1 year off but my circumstances have changed and I’m currently not working. I can’t afford the monthly payments anymore , I’ve rang my finance provider and they can’t reduce my monthly payment. Any help is appreciated. Thanks.
Carlz - 23-Jun-18 @ 7:35 PM
My partner can not afford to pay his car finance now as lost his job, contacted with *car brand* finance specialist - he told him to miss his payment and then contact with them. That sound a little bit strange as that kind of payment missing is against him. He send email to them as well but not getting any answer on this, and not sure what to do now.
Anna - 15-Jun-18 @ 10:30 AM
My grandad got a car on finance. Then three months ago he had a triple heart bypass . Then got phumonia and is still in hospital and can't walk is there anything we can do so he can get out of his agreement as he won't be able to drive anymore it's paid upto date but it's a lot of money for nothing
Tambo - 7-May-18 @ 10:43 PM
L1 - Your Question:
Hi Need some advice please In Nov 2017 I took on a conditional loan agreement my circumstances have changed and I cannot afford the paymentsI rang the finance company to ask about options which wereTerminate early and pay £9,500 on an agreed payment planSell the car and settle the finance which is £12,700 I have been offered £9,500 so I have a shortfall I looked into purchasing a cheaper car and adding the shortfall to the new finance agrement but I have a bad credit history due to a marital breadown and was refused I need a car for my job been without is not an option Any advice would be welcome

Our Response:
Sorry we can't give individual financial advice like this. The best thing to do would be to go to your nearest Citizens' Advice for help.
MotoringOnABudget - 2-May-18 @ 2:29 PM
Hi Need some advice please In Nov 2017 I took on a conditional loan agreement my circumstances have changed and I cannot afford the payments I rang the finance company to ask about options which were Terminate early and pay £9,500 on an agreed payment plan Sell the car and settle the finance which is £12,700 I have been offered £9,500 so I have a shortfall I looked into purchasing a cheaper car and adding the shortfall to the new finance agrement but I have a bad credit history due to a marital breadown and was refused I need a car for my job been without is not an option Any advice would be welcome
L1 - 29-Apr-18 @ 9:04 PM
mollie - Your Question:
I need to get out of my car finance as I am leaving my job, how can I do this?

Our Response:
Check the terms and conditions of the finance agreement. See what the penalties are etc. The best thing to do is to call the finance company and ask them about it, they may agree a temporary reduction in payments until you find a new job etc.
MotoringOnABudget - 17-Apr-18 @ 10:06 AM
I need to get out of my car finance as I am leaving my job, how can I do this?
mollie - 16-Apr-18 @ 12:03 PM
if I do not pay the rates that I can pay for?
Nick - 22-Mar-18 @ 10:06 PM
Hello . I bought a car in Finance and a week ago I hit her badly in the Netherlands. the insurance does not give me any £. if they only pay for Finance?
Nick - 22-Mar-18 @ 10:04 PM
Troubled- Your Question:
Hi. I live in Northern Ireland. My ex has a finance car in my name. I tried to get the car back and sought legal advice and tried to get the police to take it back as well, but because he is the log keeper, I couldn't get it back. I had to take out an IVA to maintain the payments at a lower rate, but it's still expensive. The finance is with Black Horse but they won't let me out of it and said attachments would be placed on wages to get the money if I stopped paying it. I'm not allowed to take the car back myself either. They wouldn't transfer the finance over to my ex either. It ends in September 2019, but I think it's so unfair to be paying a finance on something I have no control over and can't take it back for myself. Black Horse said they tried to locate the car but I know they were lying. My ex has never paid one penny towards this and it is costing thousands. He still has the car. Please can someone help because this cannot be legal. I desperately tried to get legal help but was told there was nothing I could do. It's put me in debt and I've already paid two thirds of it. I'm on my own second hand car and have endless problems with it but can't afford a new one and I need it for work. I didn't want to go down the route of bankruptcy as that would affect me for a long time. I find it so hard to manage financially and it really causes a lot of anxiety. Please can someone help because this cannot be right.

Our Response:
The V5 is not proof of ownership. Is the car referred to in the finance agreement or was it a private loan? If the former and the finance is in your name, it's your car. Report it as a stolen vehicle? Take your boyfriend to the small claims court? It doesn't sound like the legal advice you've had has been very effective.
MotoringOnABudget - 21-Mar-18 @ 11:07 AM
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