6 Ways to Ditch Unaffordable Car Debt

Owning a dream car can quickly turn into a financial nightmare, quickly screeching to a halt when car repayments start devouring your budget, leaving you drowning in debt. This harsh reality bites hard for many South Africans, caught in a vice of rising interest rates, stagnant wages, and soaring living costs.

In recent years, South Africa has seen the repo rate soar to its highest since 2008, making car loans more expensive and putting additional financial strain on consumers.

It’s not just interest rates torching car affordability. Imagine filling your tank with petrol that burns a hole in your wallet, navigating toll roads that drain your bank account, and shelling out for ever-increasing insurance premiums. These hidden costs, piling on top of loan repayments, push many to the brink of financial combustion.

Shifting Gears: Managing Unaffordable Car Repayments

Caught in this financial gridlock? Don’t panic. Let’s explore options to get you back on track

 

1. Engage with Your Lender

Proactively contact your lender if you foresee difficulties with your repayments. Transparency about your financial challenges can open up options such as loan modification, a temporary hold on payments, or an extension of your loan term. Understanding the long-term implications of these adjustments is crucial.

 

2. Trade in Your Car

This option not only allows you to transition to a more affordable vehicle but also simplifies the process of getting out of your current loan. Use online valuation tools or consult with multiple dealerships to get a fair estimate.

Before going down this route, check the remaining balance on your car loan to understand your financial position. If you owe less than the car’s value, you’re in a positive equity position, which is ideal. If you owe more (negative equity), you’ll need to consider how to cover the difference when trading in.

 

3. Consider Selling the Car

If keeping up with payments is not feasible, selling the car might be a practical option.

If the car is no longer affordable and refinancing is not an option, selling it may be the next best step. If you owe more on the car than it’s worth (negative equity), you might still have to pay the difference to your lender. However, selling could alleviate the monthly financial pressure.

 

4. Refinance Your Car Loan

If your credit score has remained stable or improved since you took out your car loan, refinancing might be a viable option. Refinancing can potentially lower your interest rate and monthly payments, making the loan more manageable. However, it’s essential to consider the total cost of the loan over the new term.

 

5. Consider Debt Review

Feeling like you’re sinking under a mountain of debt? Debt review offers expert guidance. Counsellors assess your situation, create a realistic budget, and negotiate with creditors to restructure your payments. Lower monthly costs and extended terms can take the pressure off. While under review, taking on fresh debt is a no-go zone. Think of it as a financial detox – focus on clearing existing loans before venturing into new credit territory.

Bonus: Use our free tool to find out whether you are overindebted – Calculator

 

6. Voluntary Surrender

As a last resort, voluntarily surrendering the vehicle to avoid repossession can be considered. However, this should be done with full understanding of the financial and legal implications.

If you’re struggling, take action! Contact your lender, research debt review, and reach out for financial advice.

Facing up to financial difficulties with car repayments demands prompt action and informed decisions. Each option carries its considerations, but taking control of the situation can lead to a more manageable financial future.

Remember, you’re not alone in this financial race. Shift gears, take control, and drive yourself towards a brighter financial future.

 

 

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