Auto Loans Are the Fastest-Growing Category of Non-Housing Debt. Here Are 3 Tips to Stay Ahead of Your Payments

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  • Higher vehicle costs have led to an uptick in auto loan debt.
  • It's important to keep up with your payments to avoid unsavory consequences.
  • If you can refinance your loan or roll extra money into payments, you may be able to get out from under the debt sooner.

Owe a lot of money on your car? Here's how to make sure you don't fall behind.

In the course of 2021, many supply chains were battered due to COVID-related shutdowns. That led to a shortage of everything from food items to building supplies to computer chips, including the ones needed to make today's vehicles run.

Because of that shortage, vehicle prices soared last year in both the new car and used car markets. And unsurprisingly, consumers wound up having to borrow more to finance cars.

In 2021, auto loans were the fastest-growing category of non-housing consumer debt, according to Visual Capitalist. But the danger there is that some vehicle owners may now be in over their heads on the monthly loan payment front.

If you took out an expensive auto loan, it's imperative that you keep up with your ongoing payments. Falling behind on that debt could cause extensive damage to your credit score. It could also put you at risk of having your car repossessed, which could lead to consequences such as losing your job due to not having a way to get there.

If you're worried about your auto loan debt, here are some tips to keep up with the payments you've committed to.

1. Follow a budget

The better a grasp you have on your bills as a whole, the easier they'll be to pay individually. If you don't have a budget in place, take some time to set one up. The simple act of mapping out your monthly expenses could make it so you're less likely to fall behind on larger ones, like your car payment.

Of course, you might set up a budget and find out that you actually can't swing your car payments. At that point, you may have to choose other expense categories to cut back on, such as cable or entertainment. After all, having a way to get places (including your job) is essential -- more so than having access to content or getting to attend social events and outings.

2. Look at refinancing

Just as it's possible to refinance a mortgage, it's also possible to refinance an auto loan if there's a better deal to be had. If you got stuck with an expensive borrowing rate on your car loan, explore your options for swapping your existing loan for a new one with better terms. You might manage to lower your monthly payments substantially.

3. Pay down your debt when windfalls arrive

The sooner you're able to pay off your auto loan, the less interest you'll accrue on it -- and the sooner you can stop worrying about having those monthly payments hanging over your head. If you come into extra money during the year, it could pay to use it to pay off your vehicle ahead of schedule. That's something to keep in mind before spending your next bonus or tax refund.

Many Americans are carrying large amounts of auto loan debt due to the higher cost of cars these days. If you're in that boat, these tips could prevent you from falling behind -- and suffering the consequences.

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