All of us enjoy lavish lifestyle. And with availability of different types of loans in the market, it gets easier to splurge and live an exuberant state of life.
However at times, we spend more than what we need and it gets really hard to arrange for payouts of the loan. One of the commonly misused loans is an auto loan. Despite meeting all the formalities and checking the car loan eligibility sometimes you end up buying a really expensive new car and realize later on that you are paying a lot more than your comfortable means.
Sometimes, a failure in a business plan or shortage of funds could force you to do away with this added burden of life. But how to get away with the financial obligations when in the middle of a loan term—is a bigger question. For, failing to payback a loan installment can bring a red flag in your CIR and ruin the score for a very long time. After you fail to pay back EMI, it gets really difficult to clean the credit report. With a red flag, only question that would hover you mind is how to get a loan with low CIBIL score
So it is better you take the right steps beforehand and find out what all you can do when you are paying huge money for auto loan.
- Know the Car Valuation
First things first, find the market value of your car before you make any decision. You need to know your car’s worth and how much loan is pending and make a decision accordingly. You can easily calculate valuation of your car online on any of the auto selling portals. Just by filling details about your car such as date of manufacture, model, and condition, its valuation will be made. Alternatively, you can visit car dealers to know about the price of the similar deals and make up your mind.
Now after you know the value of your car, you know that if it is worth pulling the loan further.
- Sell the car
Well, it might not be the easiest of the options, but it is the wisest one. When paying your car loan EMI becomes a burden it is better to get rid of it all together. Selling the car gives you money which you can use to repay the loan and close the hard time forever.
The financial emergency would end and emotional difficulty may start as a follow up. You would need a lot of courage to get used to a lifestyle without a car. The need of the hour would be to use this opportunity to mend your finances and get back to a good credit score. You can buy a car within your budget later on.
- Refinance your loan
If you do not want to part away from your car, you should opt for refinancing. It enables you get better interest rate from some other lender. The new lender would pay for the current lender and you will pay to new lender at new rate.
Refinancing of loan works well when you haven’t made many installments. Also, by refinancing focus should be on reducing the car EMI and saving some cash in hand.
- Transfer the loan
Transferring the loan is basically transferring the ownership of loan to third party. For this, you need to check your bank’s regulations. These arrangements work the best when you have a friend or any other trusted party to assume your payments. However being a financial transaction, it is important that you get the loan transfer formally.
- Save on your car expenses
If you are able to make the installment with some of the difficulty, you may still continue your loan with certain change in your spending habits.
First of all you can save on your car insurance and car service expenses. Next you should make a budget so that you know what comes in and where it goes. You should maintain all the expenses and income. Use a mobile app to keep track of your expenses. It will help you outline the expenses you can do without. Hence you would save enough to retain some money during this hard time.
As important it is to save some funds month on month, as is to add some income avenues. Gradually the change in your financial habits would make your auto loan affordable to you.