Can't Make Car Payments

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What Can I Do?

I am a single mom that bought a Ford Explorer two years ago. It was a one year old model. Currently, I owe $17,000. I owe for April and May. The payments are $430 a month. I teach school but do not receive a salary in June and July. What can I do? I would like to get out from this upside-down loan.

Start Digging Out

Financial experts usually tell people who are stuck in an upside-down loan to keep the car and keep making payments until they can get the amount they owe down to the car's actual value. But if you really can't make the payments, then you could try selling the car yourself (not through a used car dealer). There's a chance you might be able to make back what you owe and pay off the loan that way. After that, shop around for a used car that you can pay cash for. Better to drive a clunker for a few years than to dig yourself deeper into debt.

Tutor in Summer for Extra Cash

I would recommend maybe tutoring during the summer to help raise extra money. I tutor for a tutoring company or pick up students on my own and easily make about $25 per hour doing this.

Another Proponent for Supplemental Income

I don't know if this helps now, but my sister is a school teacher and she's teaching summer school. Here in Texas, the pay is nearly triple what she gets in the regular year, plus they only teach on Monday through Thursday from 8am to noon. Also, in my hometown, there are several summer preschool programs that only go a couple of days a week most of the summer and you would make enough to at least pay your car payments. Maybe you could find something like that to supplement your pay.

Plan Ahead

For the teacher with no paycheck and two months of car payments:

  1. For the immediate, I'd sell something or cash in a CD (even if there's a penalty) to get current on the payments.
  2. Get a job for the two months. Try a temporary help agency.
  3. Don't try to pretend the debt away. Talk with the lender.

For the future, I'd suggest making extra payments and get a few months ahead on the loan. If there are two months of $430 car payments ($860), put aside an extra $86 for the other ten months and then you'll have those payments at the end of the next school year.

Divide by 12

I don't have any immediate advice. However, some school systems offer the option of receiving 12 check per year instead of 9, allowing you to live on the same amount of money year round.

Honesty is Always Best

In the article, you said that you are two payments behind on your car. Go immediately to your lender in person if you can and ask what would be the best thing for you to do. I worked at the bank and know honesty is always the best policy. They do not want your car. Perhaps they can work out something for you, since you will have income soon.

Sell the Car

I believe you should sell the car. I have always bought used cars and paid cash for them. My best cars were from the elderly. They generally had very low mileage. We had an area in our budget for future repairs. If maintenance is a future concern for you, perhaps there is a vocational school in your area that will do maintenance and repairs on cars for a nominal fee. Two other areas you might wish to explore is obtaining a job for the summer or see if your school district has a policy where your salary is distributed over a twelve-month period.

Transportation that is Affordable

Pardon my frankness, but you obviously can't afford that vehicle. Sell the car, pay off the loan, and with the proceeds, buy an older, less expensive car. Another option is to sell your car and take public transportation instead of buying an older car if the thought of being seen in an old car makes you cringe. Either way, you must be realistic. Your teacher's salary will not cover the cost of a car loan of that size, unless someone else pays your rent and buys your food.

It is likely you will lose the car to repossession at the rate you're are going, so it's far better to sell it yourself and clear the loan, rather than wait to have the car taken from your driveway. I was a single mother (and a high school teacher) and drove a $650 car for years in the mid-1990s. I kept my car clean and well-maintained, and when I later moved across country, I sold my car and went without a vehicle for over a year. I wasn't willing to go into debt for transportation. Public transportation is inexpensive and walking is free.

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