Sometimes Arizona consumers get locked into a car loan with unaffordable monthly payments. Possibly, they buy a vehicle on impulse without really considering how the payments fit their budgets. Another likely scenario involves a job loss or extended illness. In these cases, Arizona car buyers originally have no problems making their payments. However, after experiencing a financial setback, these payments are no longer affordable. No matter what led them to the situation, these consumers are often left with the same dilemma. They want to get out of the car loan without ruining their credit scores. Luckily, for these Arizona drivers, solutions exist, but repossession is definitely NOT the answer.
Why Arizona Consumers Who Want to Get Out of an Expensive Car Loan Should Avoid Repossession or Voluntary Repossession
Simply giving up and allowing the lender to repossess the vehicle is a bad plan. First, repossession significantly lowers credit scores and stays as a negative item on credit reports for seven years. Second, repossession won’t necessarily get you off the hook financially.
Most repossessed vehicles are sold at auction. Then, the lender comes after the Arizona consumer who took out the car loan for the difference between the vehicle’s selling price and the loan balance. Typically, this consumer must also pay repossession fees. In the end, drivers who endure repossession may shell out thousands of dollars, tank their credit scores, and lose their cars. It is a terrible situation for any Arizona resident.
On the surface, voluntary repossession may seem like a better option, but, in reality, it isn’t much different from forced repossession. Normally, the impact to credit scores is less harsh with voluntary repossession. Also, there are no repossession fees charged in the process. Yet, there is usually no forgiveness from the lender with the car loan balance. After the lender sells the vehicle at auction, the consumer is still obligated to pay the difference between the selling price and the loan balance.
Alternatives to Repossession for Arizona Consumers Who Can No Longer Afford their Car Payments
Once any Arizona consumer realizes that they can no longer make their car payments, they should immediately contact their lender. Believe it or not, most lenders are willing to work with their borrowers. It is at least good to keep lenders in the loop so that they know, in spite of your difficulties, you are making an effort to keep up with your responsibilities.
Next, consider one of these three options.
Sell the car.
If you are “upside-down” in your vehicle – owing more than the current value of the vehicle on the car loan – this is not an ideal solution. However, you could get enough money from the sale to make payments on the remaining balance manageable. On the other hand, if you have equity in the car, selling it could yield enough cash to pay off the auto loan and leave you with extra money to put toward a different vehicle.
Refinance the vehicle.
If your credit score was low when you financed the car, and it has since improved, refinancing at a lower interest rate is a possibility. This could make your monthly payments more affordable. Even if your credit score has not significantly increased, refinancing is an option worth exploring. It’s possible that you weren’t given a fair interest rate on your car loan, and another lender might give you a better deal.
Find a car buyer to take over your payments.
If you are truly desperate to get out of your loan, you may find a buyer willing to take over payments. This is especially true if your vehicle is in high demand. Keep in mind that your perspective buyer will need a qualifying credit score/income in order for your lender to agree to the swap. Therefore, an ideal candidate is a friend or family member – someone whom you already know.
Any of these alternatives to repossession may leave Arizona consumers in a less-than-ideal position. You might lose money, and you will need to figure out how to purchase a replacement car. However, your credit score should suffer no (or minimal) damage. This should make it easier to finance a less expensive vehicle that will better fit your budget
How to Get Better Credit Before Applying for a Car Loan
Arizona drivers planning to finance a car purchase in the near future should check both their credit scores and their credit reports before starting the loan application process. Knowing where you stand with your credit will give you an idea as to what you can expect in an interest rate. Going through your credit reports also allows you to check for the kinds of errors that bring down credit scores.
The Fair and Accurate Credit Transactions Act (FACTA) entitles all consumers to annual free copies of their credit reports from each of the three major credit bureaus. Just go to www.annualcreditreport.com to request your copies from TransUnion, Experian, and Equifax. While looking over your credit reports, if you find inaccuracies, contact Credit Repair Lawyers of America in Arizona. One of our experienced credit attorneys will then remove these errors for free and get you clean credit reports.
How Arizonians can Get a Free Credit Repair Lawyer
Don’t let errors on your credit reports bring your credit score down. At Credit Repair Lawyers of America, we’ve been cleaning up credit reports for consumers since 2008 for free. How do we do it? All of our fees come from the defendants in settled cases. This is why our clients pay nothing for the work we do.
Let’s start the conversation about what we can do for your credit. Set up your free consultation today by calling Attorney Gary Nitzkin at (480) 771-6001 or contact us on our contact page.
For more information about Free Credit Repair, please visit https://creditrepairlawyersam.com/arizona/credit-repair/.