Millions of Americans are at least three months behind on their car payments, the benchmark for many lenders to trigger a repossession and a warning light for the economy.
In fact, according to a Federal Reserve Bank report, the number of these troubled borrowers is 7 million, 1 million more than it was in 2010 following the global financial crisis that required an auto industry bailout.
If you are one of these borrowers, or afraid you might get behind, here are some things the experts say you can do:
Familiarize yourself with the loan
Before you buy a vehicle, shop around for the best financing deals. Consider the interest rate and the length of the loan, not just the amount of the monthly payment.
Know what you can afford
The car buying process can be exhausting and an auto seller may convince you that, yes, you can buy a car that you may not have the money for a few months later. So before you pick out the car you want — the right color and and all the options — set a budget.
Prioritize your bills and costs
Can you cut some expenses to save money? Can you pay your car loan — which is secured with the car — before you pay other debts, like a doctor’s bill, which won’t trigger a repossession.
Consider using emergency savings
If you’ve saved for a rainy day and you are now behind, this might be the time to tap into that account. In addition, a tax refund also might help you getting caught up.
Inform the lender
If you are late, or think you probably will be late, let your lender know. If you are having a hardship, such as a medical problem or job loss, the bank often is understanding and may be able to offer some leniency.
Ask for consideration
If you miss payment, as the lender to take your situation into account until you can get back on track. You may be able to work out a deal. The bottom line is the creditor doesn’t want your car, but it will take it if it thinks you aren’t going to make good on what you owe.
If you are overwhelmed, contact a reputable nonprofit credit counseling organization. There may be a fee for the service, but the organization can help organize your finances, negotiate with creditors and help you get caught up.