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How to Reduce Monthly Car Payments

Pankaj Chobharkar
Here is some information on several ways to decrease the quantum of car payments.
On account of the current state of the economy, an increasing number of people are looking for ways to bring down their vehicular payments. For some, car loans take away a big chunk of their income. Sometimes, unexpected expenses occur and make your income look smaller than always. There are a few ways which can provide you with some relief on this front.

Large Down Payment

An excellent method is to make a substantial down payment. This will result in reduction of the money taken from car financing, and will minimize the amount to be paid. But usually, people do not have that kind of money and end up paying more each month.

Auto Refinancing

Many companies that work only in the field of refinancing auto loans, are available today. This option increases the length of the loan, cutting down the monthly payment. Although some companies do not provide financing below a certain amount, there are also companies that refinance auto loans with bad credit.

Personal Loan

Opt for credit unions instead of banks for these loans, which have higher interest rates. This will also allow you to increase your deductibles, as you will own the vehicle.

Used vehicles

After buying a secondhand car, you can rent it out during the weekdays. This rent will pay for its own monthly payments, and you can still use the vehicle on weekends. After few months, you can use it without any pressure on your income.

Rate of Interest

By using a bank system called the auto payment calculator, you can modify your rate of interest. Make a proper request for it after carefully calculating the rate, which you are comfortable with.

The Hardship Plan

Get in touch with your lender and request this plan. Support it with all the necessary documents, get it in writing, and check if the clauses are going to ease your situation, prior to signing it. You may have to shuffle your budget and expenditures in case you go for this option.

DIR (Debt to Income Ratio)

Having a high DIR will result into problems for your entire budget system. All your monthly expenditures divided by the gross income, will give you this ratio. By keeping it down, most of your financial problems, including your car payments, will get reduced.

Home Equity Loan

You can use this option to buy a vehicle. These loans have a lower rate of interest, so your monthly payments will be lesser. Their interest may also be tax deductible. Another way would be to avail it on a personal level, i.e. from a relative or a friend, to get a low interest rate.

Bad Credit Car Loan

Though you have bad credit, you can get a car loan by this option. This is helpful for people who badly need a car. But large banks are not very keen on giving such loans. In this case, you have to look for small vehicle dealers who also provide financing options. These people usually are the moneylenders for bad credit.
What you should really do is to buy a car, that fits your budget comfortably. But sometimes, things turn out differently than you had imagined, and you have to find your way out of this mess. Saving your money is one of the best options in such cases.
Disclaimer: The information given here is reference purposes only and does not directly recommend any specific financial course of action.