When High Car Payments Become Unmanageable
If you’re dealing with extremely high car payments and seeking ways to potentially reduce them, the current moment could be ideal for refinancing your vehicle loan. Frequently, car buyers initially believe that monthly payments of $700, $800, $900, or even $1,200 will be manageable, but after a year or two, you may discover these payments have become unaffordable.
How Dealer Add-Ons Inflate Your Payments
Often these payments have been inflated because the dealership tacked on thousands of dollars in additional products to your loan. Through refinancing your current loan and eliminating these add-ons (we’ll explain the process), you can decrease your principal balance, secure a refinance at a reduced rate, and lower your monthly payment.
Current Market Conditions Favor Refinancing
The timing may be particularly favorable since, according to auto finance news, interest rates have decreased by 26 basis points. Therefore, when you reduce both your principal balance and interest rate, you could likely extend the loan term slightly. For instance, if you originally had a 5-year loan and are two years into it, you effectively have three years remaining.
Extending Terms to Lower Monthly Payments
By refinancing into a 4-year loan, you’re essentially restarting the payment clock. While this results in a slightly longer payment period, if you need to reduce your payment from $1,100 to $600, this approach might work depending on how much you can eliminate from your principal and how significantly you can reduce your rate.
How to Reduce Your Principal Balance
Our website, Car Short Sale, provides detailed instructions on reducing your principal by removing these add-ons from your loan. In the most recent case we examined, the dealer had added $12,000 worth of add-ons to this person’s loan. Many of these weren’t even necessary, and we successfully reduced their principal by thousands of dollars.
Self-Service Add-On Cancellation Process
The website provides complete instructions that allow you to handle this process independently. Every loan includes cancellation policies for these add-ons that you can utilize to your advantage.
Strategic Order of Operations
The recommended sequence is: first, reduce the principal by canceling the add-ons; second, refinance to secure a lower interest rate; and third, consider a short sale if needed. Perhaps you need to sell the vehicle or find a resale buyer to exit the loan entirely. Meanwhile, you’ll have lower payments and won’t be straining your budget with a $1,000 monthly car payment.
