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How to lower your car payment without refinancing

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Refinancing your car loan can make the monthly payment more affordable. However, you will likely have to agree to an extended loan term and pay more interest over the life of the loan.  

The good news is refinancing isn’t your only option to lower your car payment. Other viable alternatives can alleviate the added stress of dealing with a high car payment and create wiggle room in your budget.  

3 ways to lower your car payment without refinancing 

When you sign on the dotted line to get an auto loan, you’re generally given a monthly payment that’s due each month for a set period. If the payment seemed doable when you took out the loan, but no longer works due to changes in your financial situation, there are options available that don’t require taking out a new loan 

1. Request a loan modification 

Contact the lender to explain that you are struggling to stay afloat financially and risk falling behind on your auto loan payments. The first representative you speak to may not offer much assistance or options, but you can ask for the loss mitigation department to find someone who can help.  

Repossessions are costly and time-consuming for the lender. So, they may be willing to modify your loan, which could include lowering the interest rate or loan term, to make the monthly payments more affordable. Alternatively, the lender could agree to a short-term payment plan that involves deferring your payments for a few months to give you some much-needed financial relief.  

If you’ve already missed a payment on your auto loan, you may not be out of luck. However, you should communicate that you are experiencing financial hardship sooner rather than later. The lender could agree to divide the past due balance into smaller amounts that you’ll pay over an extended period.  

2. Trade it in for a less expensive car 

Assuming you’re not upside down on your car loan — or owe more than what it’s worth — trading in your car for a less expensive one could be sensible. The difference between the trade-in value and what is owed on your current loan will lower the new loan amount. And you won’t have to go through the hassle of listing your car for sale and hoping to attract the right buyers.  

3. Sell privately and buy a less expensive car 

If you want to earn even more for your ride, consider selling it privately. You will need time and patience, but you could maximize your cost savings since private sales generally mean more money in the seller’s pocket. In turn, you will have more to put down on your new car purchase.  

Word of caution: There’s a shortage of cars available for sale nationwide. So, whether you’re planning to buy a less expensive new or used model, you may have to do some legwork to find a vehicle that works for your budget.  

When it’s better to refinance 

Refinancing your auto loan could be a better option to lower your monthly payment if you have good or excellent credit and qualify for a lower interest rate. But here’s the catch: You should request a loan term that is close to or equivalent to the amount of time left on your current loan. Otherwise, you will get a lower payment but could spend several hundred or thousands of dollars more in interest over the loan term.  

If you cannot reach an agreement with your lender or swap your current car for a ride that meets your needs, refinancing can also help you avoid repossession. Furthermore, you will get the lower payment you need and preserve your credit score, even if that means paying the lender more in interest.  

Next steps 

A hefty car payment could strain your budget and make you contemplate refinancing your loan. However, you will likely pay more interest if you get a higher rate or a significantly longer term, so you should speak with your lender to request a loan modification or consider swapping out your current ride for a less expensive one.  


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Written by
Allison Martin
Allison Martin's work began over 10 years ago as a digital content strategist, and she’s since been published in several leading financial outlets, including The Wall Street Journal, MSN Money, MoneyTalksNews, Investopedia, Experian and
Edited by
Auto loans editor