What to do if you're behind on car payments

Missing a car payment can feel scary. But falling behind does not mean you have automatically lost your car. The key is to act quickly and know your options before things get harder to fix.

Here is what you can do right now.

Call your lender first

This is the most important step. Call your lender as soon as you know you are going to be late, or even if you are already behind. Many people avoid this call because they feel embarrassed or afraid. But lenders deal with this every day. They would often rather work with you than go through the cost and hassle of repossessing a car.

When you call, be honest about your situation. Tell them what happened, how much you can pay right now, and when you expect things to improve.

Ask about a deferment

A deferment lets you skip one or more payments and move them to the end of your loan. Not every lender offers this, and you may still owe interest during the skipped months. But it can give you breathing room if you had a short-term setback, like a medical bill or a missed week of work.

Get any deferment agreement in writing before you assume you are covered.

Ask about a loan modification

A loan modification means your lender changes the terms of your loan. They might lower your monthly payment by stretching out the repayment period. You will likely pay more total interest over time, but it can make your payment manageable month to month.

Not all lenders offer this. But it does not hurt to ask.

Look into refinancing

If your credit has improved since you first got your loan, you might be able to refinance with a different lender at a lower rate or lower monthly payment. Even with poor credit, some credit unions and online lenders work with borrowers in tough spots.

Be careful of any lender who charges very high fees or pressures you to decide fast.

Know what repossession means

If you stop making payments and do not reach out to your lender, they can repossess your car. This can happen without much warning in many states. Once your car is repossessed, you may still owe money on the loan even after the car is sold. That leftover amount is called a deficiency balance.

Repossession also damages your credit score and can make it harder to get a loan in the future.

Talk to a nonprofit credit counselor

A nonprofit credit counselor can look at your full financial picture and help you figure out what to do. They can sometimes help you negotiate with lenders too. Look for agencies approved by the National Foundation for Credit Counseling (NFCC). Many offer free or low-cost help.

Avoid companies that charge big upfront fees or make promises that sound too good to be true.

If you truly cannot afford the car

Sometimes the honest truth is that the payment is just too high for your current income. If that is your situation, you might consider voluntarily surrendering the car. This is called a voluntary repossession. It is still negative on your credit, but it can be less damaging than an involuntary repossession and shows you took responsibility.

Another option is selling the car privately if you owe less than it is worth. That money can pay off the loan and possibly leave you with a little extra to find cheaper transportation.

The main thing to remember

Do not go silent. The worst thing you can do is ignore the problem and hope it goes away. Lenders have more flexibility early in the process than after they have started repossession steps.

You have options. Taking one small step today, even just making that phone call, can make a real difference in where things end up.