Lowering Car Payments

Car Payments Causing Budget Strain – Helpful Tips

How To Reduce Car Payments

Car payments – One of the worst investments on this planet.  As soon as you sign on that dotted line your investment is reduced anywhere from $500 to $10,000, and higher.

For those of us without transportation alternatives, those car payments can feel like the hands choking our budget right out of the ballpark.

Here are some ‘best’ ways to help ease car payment budget strain for you and your family:

1 – When car loan refinancing is a good idea:

  •  When you are NOT in the last year of your car loan payments – Principal payments are highest at this last stage of your auto loan and you are paying the least amount of interest.  In other words – You are getting the best, ‘bang for your buck,’ at that time.
  • When you are in a position to increase your monthly auto loan payments and reduce your month to month obligation by a period of several months.
  • When your auto refinance rate is lower than the rate you are currently paying.
  • Best time to refinance an auto loan – When your auto loan is greater than the value of your car.  That’s when you have the most leverage in an auto loan refinance.
 When you need tips and advice from other car owners with your same vehicle → Accessories Specifically Designed For Your Auto Make Model And Year

What should you do before you refinance a car loan?

  • Check your credit rating – Get off information that is not correct BEFORE any refinance efforts are made by you.  This is true of any major purchases.  Higher credit scores get lower interest rates and higher approval ratings.
  • Verify with your lender what credit score they used for your initial auto loan approval.  Make sure your most recent credit score is higher.  If not, take some time to build up your credit score rating before re-applying for an auto loan (or any loan).
  • Use the dispute process to remove credit rating reporting errors.
  • Check with creditors not listed on your report to see if they will report your good payment history – Not all creditors report to the credit agencies.  If you have held a long standing good credit account with someone, make sure it is listed on your credit report too.
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Using Debt Consolidation And Auto Loan Refinancing Wisely

  • By reducing your loan balance faster, you may be able to negotiate a lower monthly payment.  You’ll have the same interest rate, but your payments are lower.  For instance, using a $5,000 payoff balance, and by adding an extra $1,000  to your payments, to lower that balance to $4,000.  You can then initiate a meeting with your lender to talk about loan restructuring.  Couple this with a better credit rating and your negotiating ability goes way up.
  • When you have multiple debts, paying multiple interest rates you may be paying excessive monthly payments for multiple obligations instead of only a few.  If you combined all those payments, got rid of the high interest rates, and only had one payment.  And, you aren’t jeopardizing your income, then find out about a consolidation loan.  Fewer payments are easier to monitor than more payments are.  Tracking one payment instead of several, and making timely payments a priority could very well raise your credit rating too!
  • IMHO these are not the best ways to manage debt, but if it is your best debt alternative then by all means, use it!  But use it wisely to reduce debt-NOT to increase debt.
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Are you still seeing red with your budget and monthly payment schedule?  Here are more  helpful ideas

  • If you are not upside down on your car payment/loan obligation then you have the option of selling your high priced car and getting something more affordable.  If you have extra cash after you pay off your current loan, then use that cash for a down payment on something more affordable.  Get a lesser auto loan in terms of balance and interest rate.  Better yet – Pay cash for something.
  • Reconsider public transportation.  Instead of paying parking meter, garage storage, auto insurance and auto maintenance fees.  But first figure out if this works for you efficiently.
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