Laid Off: I Can't Afford My Car
Hi Taylor - My husband and I are in a bit of bind. He recently got laid off and is receiving unemployment, but he has a $700/mo car payment that we can no longer afford. What are our options? We don’t want to have the car repossessed and take a credit hit (his credit is already subpar), but I don’t know how we can cover the payments. – Tracy
Hey Tracy - So sorry to hear about the situation. These unforeseen financial problems can really be the pits.
You should, of course, do your best to avoid defaulting. You certainly don’t want to take on another loan that might make the situation worse. There’s also the question of transportation - could the lack of transportation prevent your husband from making his scheduled job interviews?
There’s a possibility that you’ll be able to rework the terms of the loan. Your best bet is to work with the lender and/or dealership; it’s not in anyone’s interest for your husband to stop making payments and take a hit on his credit score. If your husband can make some form of monthly payment until he gets back to work, you might be able to refinance and get terms that will help you avoid creditors. The only way to find out is by asking your lender.
Another option would be to trade this car in for a cheaper model. If that’s a possibility, it would certainly be preferable to losing the car and taking a hit on your credit score. Most dealerships will allow for that type of trade, assuming the vehicle is in good shape and still under some type of warranty.
The steps you take depend in large part on your current financial situation and prioritizing your expenses. If you have a budget, plug in your numbers for each outcome to determine which decision is better for you. Your husband may be eligible to receive additional unemployment benefits. If he is, then add this income to your budget to see whether you can still afford your car or if you should reallocate his benefits to other categories.
Keep your head up and investigate all your options. Ask for advice from friends, family and on forums like this one. There’s no easy answer I can give right now, but if you put in the effort and exhaust all options, things will be okay.