If you can no longer afford your car payments, some options are to find someone else to assume the loan or to sell the car.

You took out a car loan, and you’ve been making all your car payments on time for two years. But now, your financial situation has changed and you’re having trouble paying for the car. Here are a few options to consider when you’re unable to make your payments.

Talk to Your Lender

If your financial difficulties are temporary or likely to improve, you may be able to come to an agreement with your lender. Bankrate explains that your lender might allow you to postpone a few payments or alter the terms of the loan. For example, you might be able to change the loan so that you pay a lower amount each month. Keep in mind this option means the loan will take more time to pay off.

Offer Up the Loan

If talking to your lender doesn’t result in a solution, one way to get out of a loan is to hand over both the car and the responsibility for the loan to someone else. You can put out an ad to find someone who’s willing to assume your loan, notes Bankrate. However, your lender will have to check that person’s credit and agree to the transfer. And if your car’s value has depreciated by a large amount, you may have trouble finding someone to agree to the arrangement.

Sell the Car

The Office of the Attorney General of Washington State explains that another option is to sell the car and pay off the remainder of the loan with the proceeds. This is a good solution if your car is still worth more than the amount you owe. If the car is worth less than the balance on the loan, you’ll have to come up with additional money to make up the difference. Also, you may face a fee for paying off your loan ahead of time.

Voluntary Repossession

If the options above do not work and you cannot make your car payments, your lender will take the car. In that case, it’s best to ask for a voluntary repossession, as the Chicago Tribune explains. This allows you to prepare for the repossession, remove your belongings from the car, and plan for alternative transportation, instead of having the car removed when you’re not expecting it. You’ll also avoid some fees that come with involuntary repossessions. Repossession does serious damage to your credit, so you should try to avoid this last option if possible.

For the best chance of avoiding repossession, talk to your lender to start exploring potential solutions as soon as you begin having trouble making your payments.

Sarah Brodsky

About the AuthorSarah Brodsky

Sarah Brodsky writes about economics, personal finance, religion, and culture. She covers credit counseling, debt, and personal finance for Investopedia and the CESI Financial blog and has contributed work on Judaism and culture to the Jewish Daily Forward's Sisterhood blog. Her writing has appeared in the Washington Free Beacon, the St. Louis Business Journal, Info Tech & Telecom News, the Springfield News-Leader, Edspresso.com, School Reform News, and other publications. She earned a bachelor's degree in economics from the University of Chicago.