You may be able to afford your car payment if you can reduce your other expenses. Can you cut-down on food and entertainment costs? If you find that you can’t continue making your car payment try to find a buyer for your car. First find out what the sale value of your car is by consulting the Kelley Blue Book, an auto consumer guide or your car loan company. Then ask your car loan company or bank what the pay-off amount would be. The pay-off is the amount you would have to pay to completely pay-off the loan, including interest on the debt. If the value of your car is more than the pay-off amount then you could sell your car, pay off the car loan and maybe even have money left. Contact your car loan company or bank to find out what the procedure is to pay-off the loan. If you are unable to find a buyer, contact your loan company and explain your situation. They might be able to delay a payment.

If you must default on your loan it is better to be up-front with your loan company. It will save you and them time, money and frustration. Keep in mind that if your car is repossessed you might still be liable for the loan amount that is not covered after the bank sale of your car, plus any of their costs in reclaiming the car such as towing costs. Try to avoid repossession. This will have long-term negative consequences on your credit report, which could prevent you from obtaining credit in the future. Go back and read the MoneyTalks newsletter on car buying on this site. It will give you more information for your next car purchase.