Corner Attorney

Protecting your credit can be very difficult if you have way more debt than you can afford.  This article discusses two options if you can not afford your car lease payments anymore. Either pay it off in full using credit cards or turn it over and take the hit on your credit.

In either scenario your credit will take a hit.  Maxed out credit cards or high balances with little or no available room will hurt your credit, but when you pay them back down your credit will recover.

Giving the keys back to the dealer will hurt your credit for up to 7 years.  Between the two, using credit cards seems much better

If you will not be able to pay off your credit cards or make the payments, you will start getting late payments reporting on your credit.  Those can also stay on your credit for some time and looks bad when you try to get a loan.

As late fees and interest start building up eventually you could end up filing for bankruptcy which would stay on your credit for 7-10 years.

Is it better to get it over with and turn the keys over, or possibly prolong the inevitable and continue with the stress?

When a good credit score can ruin your financial life, why worry about a bad one?

AOL Autos reporter Bengt Halvorson offers consumers struggling with sky-high lease payments some advice on how to get out of their leases. According to Halvorson, simply breaking the lease and going the “voluntary repossession route isn’t the best option because it can hurt your credit score quite a bit.”

His alternatives, unfortunately, leave quite a bit to be desired: “If you do think you’ll have a job a year from now, your lease is just a few months from ending, and your credit-card limits are high, you might want to consider simply paying off the remainder of the lease (the sum of all the payments yet due) on a credit card. You will of course be paying a lot of interest over the long run, but you’ll be free of costly insurance payments on the newer vehicle and provided you can maintain your card payments you won’t destroy your credit as you would going deadbeat on the lease.”

The problem? Oh, where do I begin? Dramatically increasing the amount of credit card debt you carry can also hurt your credit score. And “if you think you’ll have a job a year from now?” If you are so great at predicting your financial future, how come you ended up with a lease payment you can’t afford? Borrowing money in anticipation of a brighter future is very, very, very rarely a ticket to sound financial footing.

His best alternative to a voluntary repossession involves finding someone willing to take over your lease: but in the current car market, that might not be so easy.    –more