Struggling to pay your car loan? Here's what to do

Act early, and don't go silent

Money stress makes it tempting to put the bills in a drawer and hope. With a car loan, that's the one thing that makes it worse. Missed payments quietly add fees, extra interest and marks on your credit file, and they narrow your choices. The earlier you deal with it, the more options you have. So before you miss a payment, or as soon as you have, take a breath and start working through the steps below. You have more rights and more help than most people realise.

General information only, not financial advice. If you're in financial difficulty, please talk to a free financial mentor, listed below, or your lender.

Talk to your lender first

Your first call is to your lender. It feels like the hardest one to make, but it's the one that helps most. Tell them what's changed, whether that's a drop in income, a job loss, illness, or a bill you didn't see coming. Lenders deal with this all the time, and most would far rather agree a temporary plan than have you fall behind. Ask what options they have. Often they can rework your payments in some way, especially if you come to them early rather than after months of silence.

Your hardship rights under the CCCFA

This is the part a lot of people don't know. Under New Zealand's Credit Contracts and Consumer Finance Act, the CCCFA, you can apply for a hardship variation if you can't reasonably keep up your repayments because of something outside your control, like illness, injury, losing your job, or a relationship ending. It's a right, not a favour you have to beg for.

If your lender agrees, they can change your contract to help you get back on your feet, for example by:

• Reducing your payments for a set time, so they're more manageable.
• Extending the term of the loan, which lowers each payment (though it usually means more interest over the whole loan).
• Pausing your payments for a while to give you breathing room.

The catch is timing. A hardship variation works best when you apply early, while you can still realistically make some payments. Leave it too long, or fall too far behind, and you may lose the right to use it. So don't wait to see if things sort themselves out. You can read exactly how it works, and how to apply, on consumerprotection.govt.nz.

Get free, independent help

You don't have to work this out alone, and you shouldn't pay anyone to help you either. There's genuinely free, independent support in New Zealand, and using it early can change how the whole thing plays out:

• MoneyTalks gives free, confidential financial mentoring. Call 0800 345 123, text 4029, or visit moneytalks.co.nz. They can help you understand your options and talk to lenders on your side.
• Community Law offers free legal advice, including on debt and repossession. Find your nearest centre at communitylaw.org.nz.
• Sorted has free budgeting tools that help you see where your money's going and what's left. Start at sorted.org.nz.

These services don't sell loans and don't judge. Talking to a financial mentor before you make any big decision is one of the smartest moves you can make.

Your options, laid out plainly

Once you've got advice and know where you stand, these are the paths people usually weigh up. There's no single right answer. It depends on your situation.

• A hardship variation with your current lender. Often the first thing to try, because it keeps your car and adjusts the loan to what you can manage.
• A tighter budget and a plan. Sometimes freeing up room elsewhere, with a financial mentor's help, is enough to get back on track without changing the loan at all.
• Refinancing to a lower repayment. If you're on a high rate and not in negative equity, moving to a fairer loan can lower what you pay. It's one option to compare, not a cure-all, and it's worth checking after the steps above rather than jumping to it first.
• Selling the car. If the repayments really aren't sustainable, selling and clearing the loan, then getting something cheaper, can be the honest reset. A financial mentor can help you think this through.

What not to do

• Don't ignore it. Silence removes your best options and adds fees and credit-file damage.
• Don't quietly skip payments hoping to catch up later. Tell your lender first, so it's a plan, not a default.
• Don't take on a high-cost payday loan to cover a repayment. That usually digs the hole deeper.
• Don't pay anyone who promises to fix your debt for a fee. The good help is free.

How Fair Finance fits in

We'll be straight with you: we're a referral service, not a lender, and if you're in genuine hardship, your lender and a free financial mentor come before us. Where we can help is one specific case: if you're stuck on a high rate, you're not in negative equity, and a lower repayment through refinancing would genuinely ease things, we can compare our lender panel with a single soft credit check and tell you honestly whether a fairer deal is there. If it isn't, we'll say so. If a hardship variation or free budgeting help is the better path, we'd rather point you there. For the refinancing option in detail, see refinancing your car loan, and for the law behind your rights, the CCCFA explained.

General information only, not financial advice, and not a substitute for talking to a free financial mentor or your lender. For your rights around credit contracts and hardship, see consumerprotection.govt.nz. For free financial mentoring, call MoneyTalks on 0800 345 123 or visit moneytalks.co.nz.