First, contact your creditor and ask if they will lower your interest rate. If not, and the balance of your car loan is approximately what the value of the car is, you can sell the car and pay off the loan. Another alternative to lower your monthly payments is to refinance the loan. When you refinance to lower monthly payments, you increase the term, or length, of your auto loan. This results in you paying more in interest over the entire life of the loan.
If you owe more on the car than the car is worth, it is better for you to try to sell the car and absorb the loss than have it repossessed. Repossession is a very negative remark to have in a credit report. If the car is repossessed, your creditor has the right to ask you to pay the late payments plus the cost of repossession. The creditor may also demand that you pay off the balance of the loan in full. The difference between what the lender gets at an auction for your car and the amount that you owe is called a deficiency judgment.
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