Coming to realize that you can longer afford your car payment can be a very stressful time for anyone. And if you absolutely need a vehicle to get to work or school, or because you live outside of a public transit route, then losing your car to repossession can cause trouble that goes beyond long-lasting credit problems.

When people start having a hard time with their car payment, many tend to think it’s all over and begin to live in fear of the repo man. But you may be able to avoid repossession if you realize you’re having difficulty with your payments early in the game and act quickly.

Draw up your monthly budget
A budget helps you to organize and prioritize your spending, and can be as complex or as simple as you want it. In general, simple plans are easier to write up, keep track of, and follow.

Include all your monthly income (after taxes and other deductions) and all your expenses. By being consistently aware of your income and spending at all times, you will catch it quickly if you are living beyond your means. If you are using up all your income each month without any extra left over for emergency situations or incidentals, then be aware that one relatively minor setback can mean the difference between being able to pay all your bills.

Act before you begin to miss payments
After writing out your budget, you may find a weak point in your spending or realize that you’ve come very close to being over-extended. If your credit card balance keeps growing and you’re not paying it off each month, it’s a sure sign that you’re living beyond your means.

By saving in areas where you have flexibility - food, entertainment, clothing, fuel, etc. - you will have more cash available to pay non-flexible bills such as your auto loan. This is common sense, but often overlooked - especially by consumers who don’t have a budget and don’t know what they’re spending their money on each month.

Refinance your auto loan
Refinancing for a lower interest rate will amount to a lower monthly payment, and may put your payment back into the affordable range. This may be a viable option if you have a stable job with enough income to support your liabilities, you have good credit, and your loan payments are on time and up to date. Another condition for being able to refinance is that you don’t have an upside-down loan - a loan in which you owe more than the car is worth. This is also known as having negative equity.

There are typically no closing costs associated with refinancing an auto loan. And while the exact amount of savings will depend on the size of your loan and the term (how many months to pay off the loan), saving even a percentage point or two may make a notable difference in your monthly car payment.

Lenders will each have their own rules about auto refinance, such as what types of vehicles qualify, the minimum and maximum loan amount, maximum odometer readings, vehicle condition, etc. Shop around.

Trade in your car for a more affordable vehicle
As long as you aren’t upside-down on your current auto loan, trading in for a cheaper car can mean lower monthly payments - sometimes by a lot. Some auto dealers will allow trade-ins even if you are upside-down, but that negative equity will just be tacked onto your new loan - so savings on your monthly payment may be minimal.

In severe negative equity situations you may find that your payments with a trade-down will be even higher than they were with your original loan. If this is the case, look for another solution.

Sell your vehicle outright
You’re likely to get a better price by selling to a private buyer rather than an auto dealer since the private buyer is usually willing to pay blue book value, and the dealer has to have some room to make a profit on the deal.

To get the best price, make your vehicle look inviting to the prospective buyer. If it looks junky they will expect it to be priced like junk. But if you can make the car look more presentable by spending a few bucks to tack the headliner back up and give the interior a good detailing, by all means do it - especially if you do it yourself to save money.

But be careful with putting too much money into fixing it up if you won’t get that investment back in the sale. It’s probably best to avoid spending money on major repairs and sell it as-is.

And again, you’ll be in a better position if you don’t owe more than the car is worth. You’ll be personally responsible to the lender for the difference if you can’t sell the vehicle for what you owe.

Talk to your original lender
You might be able to work out a solution with the lender - maybe get a lower interest rate, spread the loan for a longer term (but be careful that it doesn’t cause negative equity over time), or be given a grace period in which to catch up on payments.

Explain your situation and be genuine. Times are tough for many Americans right now, and you may be working with a lender who is sympathetic to your plight. And if the lender is willing to help by working with you, make every effort to keep to your new agreement.