Chances are good that you will take out a loan the next time you buy a car. Whether they are buying a car that is new or used, most people do not have enough money saved to purchase the vehicle outright; thus, financing a car purchase is quite common. Regrettably, however, many end up with a loan payment that is too high, and it can put a real strain on their finances. Fortunately, there are steps you can take to manage a car payment that is excessively high.

Before You Get Your Loan

Research your dealer! Some car buyers get a loan that is too high because they purchase from unscrupulous dealers who do not follow the regulations that protect consumers from fraud, excessive interest, and so on. Sellers who purchase from a dealer that has an auto dealer bond, however, are less likely to be taken advantage of because dealers who have auto bonds have pledged to follow the consumer protection laws. Investigate the licensing and certifications the dealer you choose to buy from has acquired.

Once You Have Your Loan

After obtaining your loan through a reputable dealer, you may still find yourself with a car loan payment that is much too high. Circumstances out of your control, job loss, or an increase in expenses may now make it difficult to afford your loan payment each month. Whatever the case may be, here are five things you can do to help manage the loan payment:

1. Get a Lower Interest Rate — Many banks and credit unions will allow you to refinance your loan payment and get a lower interest rate. This lower interest rate will reduce your loan payment each month even if you do not extend the length of your loan. Start by discussing your financial options with your bank. Typically, banks offer free financial consultation in order to help their customers manage their finances. They can help direct you on whom to call and inquire about your refinancing options.

2. Extend Your Loan Term — It is often possible to refinance and extend the length of your loan term even if you do not lower your interest rate. Adding twelve months or more to your car loan will cause the debt to be amortized over a longer period, which reduces the amount that you have to pay each month. However, you may end up paying more in interest over the life of the loan.

3. Make a Lump Sum Payment — Many lenders will lower your payment if you make a large lump sum payment toward your principal balance. Call your lending institution, and ask if it will lower your remaining payments if you pay a few hundred or few thousand dollars toward the loan’s remaining principal.

4. Reconsider Your Budget — Take a look at your existing budget and spending habits to see if you can cut back anywhere and free up money each month that can go toward your car payment.

5. Consider Selling Your Car — If your car payment will be completely unmanageable even if you follow the aforementioned tips, try selling your car either through a dealership or on your own. Make sure the dealer is covered by an auto dealer bond if you go the dealership route.


Managing a high loan payment may be difficult, but with some research and guidance options are available to help save you from racking up more debt.

Alex Levin is a marketing specialist and writer for Lance Surety Bonds, who write and provide dealer bonds and used car dealer bonds.

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