Warning signs of car loan debt

If the debt is manageable it is a natural part of life. However, when repayments become unmanageable and begin to have an impact on everyday life then it’s important to recognise there could be a problem and seek help to address is. There are key warning signs that indicate you’re heading for, or are already in, financial distress.

• Being secretive about finances – especially if discussing them more openly is usual
• Feeling anxious, scared and alone, often withdrawing from events with friends and family
• Having unpaid bills and being afraid to check bank balance
• A lack of day-do-day essentials at home including food and personal products
• Having several different credit cards or loans
• Only being able to make the minimum payment on credit card and loan debt

How can I get help with car debt?

If you find that your car loan payments begin to become unmanageable and unable to make the monthly payments, it’s important to seek help as soon as possible.

It’s important to speak to your lender as soon as you begin to feel uneasy about being able to make payments or as soon as you miss your first. Breaking the ice may be daunting but shows the lender that you’re aware of your current financial situation and are keen to resolve the problem as quickly as possible.

Whether it’s opting for refinancing or asking for a deferral, your lender can potentially agree to a number of solutions to help prevent you from losing the car.

Alternatively, we can advise on all of your debt relief options and offer support tailored to your specific needs. All advice is confidential and can help take the pressure off handling car loan debt on your own.

How car loan debt can affect your life

Auto loan debt can be a positive way to get on the road with a new car. However, if loan payments become unmanageable it can affect your life in various ways

Personal finances: Long term financing options can often be advertised as a way of getting a more expensive car at an affordable monthly payment, however, the reality is people usually end up buying something they can’t really afford and spending more on interest rates than they’d like.

Credit report: If you miss a loan payment it can have an impact on other aspects of your finances. If you fall behind on car payments your credit score will be adversely affected and you’ll struggle to secure future lines of credit such as credit cards or even a mortgage.

Relationships: Being faced with mounting pressure to repay debts can be a fraught time and understandably can have a negative impact on your relationships with those closest to you. Being faced with the prospect of potentially losing your vehicle, which can be a lifeline for family and work life, can be stressful and cause arguments between friends and family.

Anxiety: Falling into debt isn’t difficult but its impact on your mental health can be far-reaching and complex. Statistics show that many people living in debt feel isolated and don’t know where to turn for support. It can be all too easy to hide from debt, however, it’s important to remember it doesn’t take a day off and creditors will continue to chase what they are owed.

Security: Car finance is a secured loan, with the money borrowed linked to the vehicle you’re paying for. If you miss payments the creditor can take steps to seize the vehicle to reclaim payments.

How can I avoid car loan debt?

It’s important to recognise that not all car loans are bad, but you should opt for the deal that isn’t just the most suitable for your current financial situation but your future circumstances too. Here we shine a light on hints to help you from falling into money trouble.

Be realistic

When looking for a new car it can be easy to get caught up in the excitement and not think about the bigger picture. It’s important to be realistic about how much you can afford each month as you’ll be making payments for up to seven or eight years in some instances. Don’t fall for the allure of a high-end, financed vehicle with low payments – only buy what you can afford.

Weekly planning

When it comes to handling car loans many people only consider the monthly cost, not the weekly. You need to consider the impact a new car would have on day-to-day living every week as well as taking maintenance and fuel into account too. There are a few options to make managing your finances a little easier but the simplest way is to stick to a budget until the auto loan is fully paid.

The deposit

When the time comes to look for a new car, it can be useful to pay as big a down payment as you can afford. A bigger deposit will mean lower payments each month. If possible, aim to put down 20%.

Time is of the essence

They say time is money and never has the saying been truer when it comes to paying auto loans. Longer payments may come with a lower monthly spend, however, over the course of your agreement you’ll spend more on interest which quickly adds up. Paying over a shorter period will help you save in the long run.