What Happens If I Can’t Pay My Car Loan Anymore in Canada?

Posted by on Jan 23, 2024 - Archived under Bad Credit Car Loan Tips

Thousands of Canadians have found themselves in difficult situations through no fault of their own. The pandemic has wrought devastation across all aspects of our lives and financial difficulties are just one aspect of that.


So what can you do if you can’t afford a car loan anymore?


Don’t Panic

First things first. Don’t panic. Everyone needs help at some point in their lives and there is help available. There are also some practical things you can do if you can’t pay a car loan anymore in Canada.


Don’t Miss a Payment

The second most important thing to remember is to never miss a payment. This will put a dent in your credit score and cause the lender to change their attitude towards you.



Neither of which you want when you may need your score and your lender’s help later on.


Once you have those two sorted, we have some practical steps you can take to get out of the loan. Choose the one that best suits your situation.


Managing a Car Loan You Can’t Afford in Canada

While it may be a difficult situation to find yourself in, it isn’t terminal and you have lots of options for where to go next if you can’t afford a car loan anymore.


You can:


Pay off the loan with savings: If you have savings or an emergency pot, you could use that to pay off the loan. It may leave you exposed for a while but could prevent you from defaulting on the loan.


Transfer the loan: If you know someone who could take on the loan for you, it is possible to transfer the loan to them. The lender would need to agree and the person would need to qualify for the loan but it is an option. If you’d like to learn more about transferring a car loan, click here.


Work with your lender to get lower payments: Most lenders will be willing to work with you to adapt the loan so you can pay it off in full.


Some offer payment holidays to help in temporary situations while others will lower your monthly payments until things pick up.


Sell the car: If you really can’t pay a car loan in Canada at all, you can always sell the car. While it may leave you without transport, if you have paid enough of the loan off so you could afford something cheaper while paying the loan off, that could be an answer.


Refinance the loan: If you’re well into your auto loan and have plenty of equity, or you have a bad credit car loan, you can refinance for something cheaper. This is a viable method of reducing your payments while keeping everyone happy. And keeping your car. Click here to learn more about car loan refinancing.


Refinanced car loan credit karma


Voluntarily surrendering the car: The option of last resort. If you have a secured car loan, you can offer to surrender the car instead of continuing to pay for it. This will significantly impact your credit score but can get you out of a difficult situation.


We would suggest only surrendering the car once you have exhausted everything else. It’s your option of last resort and really should only be done if you have no other choice.


Before You Take Action

Before you take action, take a long hard look at your finances. If you’re in a temporary situation that will end soon, a payment holiday or a loan from family may be all you need.


If you think your situation is more permanent, discuss it with your lender first to see what they can do. Only consider selling your car if you have another or don’t need it.


If you need help any more help, we have the skills and the willingness to help. Contact us for more information!


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