Paying The Loan On A Broken Car

For all the effort Hollywood goes through, no horror movie scene can match the sheer terror of getting in your car and having the engine not start. Whether you were on your way to work that morning or the car went kaput at a stop light, the feeling of desperation and anguish someone experiences at that moment would be enough to send chills down anyone’s spine.

If they still owed money on the car, it gets even worse. Being in this situation can make you feel trapped and anxious, but remember to stay calm and realize that you always have options. Here are some steps you can take to narrow these options down and hopefully find some sort of light at the end of the tunnel:


How Bad Is It?

Your first step is to have a mechanic look at the problem and give you a no-bull estimate on how much fixing the vehicle might cost. They will be not be able to know for sure, especially since the problem may not be obvious, and they have no way of knowing what amount of labor it will take. Regardless, they should be able to place you in the ballpark of what this sort of fix would cost.

Make sure that the mechanic is someone you can trust and that they will not charge you an arm and a leg just to look at the car.


Can You Use a Lifeline?

Sometimes the worst situations can be fixed almost as if by magic. Determine if your problem is related to some sort of vehicle recall that will make the repair costs partially or completely covered by the manufacturer. Your insurance may also be able to cover the expense. Gap insurance in particular would be an amazing product to have at this point since it was designed for this sort of scenario.

Also look to any sort of coverage offered under warranty or your sale terms agreement. Lemon laws protect consumers from crooked car dealers, and some dealers have their own policies on how to address vehicles that die before their time should have come.


Scrap It or Fix It?

Insurers will declare a car a total loss or “total” it if the cost of repairs exceeds 80-90 percent of the vehicle’s value. You probably should, too. After all, an expensive fix may not keep the car running for very long if the transmission or some other major system is just going to give up next. Always think on the margins of what you should do — i.e. how much will repairing cost versus the financial gains it offers. Ignore how much money you have already put into the car to avoid the sunk cost fallacy, which is an expensive way of thinking.

Any fix that is less than 90 percent of the value of the car should be considered, especially if you are confident it will be the only major repair you will need for the time being. Otherwise cut your losses and sell the vehicle for scrap — with your lender’s permission, of course.


Pay off Your Loan No Matter What

No matter how your situation turns out, you will still owe money on your loan. Any money you get from a sale or an insurance claim will need to go towards the loan balance, or you could end up in deep legal and financial trouble.


Get by Any Way You Can

Sometimes we have to roll with the punches, even if they hurt a whole lot. Use options at your disposal to get by from day to day and avoid defaulting on your loan. See if your family can use just one car if you have to. Borrow a friend or family member’s vehicle according to a written agreement. Take out a small loan to help you pay for repairs at a credit union or small loan lender with reasonable interest rates.

The key is to avoid digging your hole any deeper by sinking your money into a dead car or trying to shirk off your loan responsibilities. You are almost guaranteed to regret these decisions in the future.

Hopefully, you will be able to get your vehicle running or sell it to cut your losses and start over again. There are plenty of lenders out there who are willing to give you a loan even if you have a large balance. Some may even allow you to roll in the outstanding debt from your old car loan when you buy a new vehicle as long as you have enough collateral to secure the extra amount. After about a year you will also be able to refinance the loan once your credit has improved to reduce your interest rates. We wish you the best of luck!

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