You may come to the realization that you cannot afford your car payment. This may be the result of a job loss or that you have determined that you want to buy a home. You may have sat down and written out your budget for the first time, and realized that you are spending too much on your car every month.
Once you have determined that you cannot afford your car you may be tempted to stop paying on it, and simply turn it back over to the bank. While this is an option, it is not a wise one. This will affect your credit negatively. Additionally this does not release you from all of the obligation on the loan. Once the bank sells the car you will end up owing the difference to the bank. The bank will come after you to make sure that they do not lose any money.
You may decide to trade the car in for a less expensive one at the dealer. While this may lower you monthly payment, you will still have to pay back all of the money. The dealer will roll any excess that you owe on the loan into your next car loan. This means that you will be upside down on your new car. Your payments may last a lot longer.
Your best option is to try to sell the car yourself and take out a personal loan to cover the difference in the amount you owe. When you complete a private sell, you are able to get more for the car, than you would if you were going to sell it to a dealer. This is because you are cutting out the middleman. You may wondering about taking out a loan in order to sell your car, but this will help you to reduce your overall debt.
