The depressed economy has had a devastating effect on everyone. It seems everyone is clipping coupons, cutting back and spending less. In some cases, people have lost their homes because they could no longer afford the mortgage. The same goes for their vehicles.

You may find yourself in that predicament. If you’ve lost your job or had to take a job making far less money than you used to, and you can no longer afford to make your car payment. What do you do if you can no longer afford your car?

Once you’ve determined this is the case, you may be tempted to simply stop making the payments and just let it be repossessed. This isn’t the smart way to handle this, as it will have a devastating effect on your credit. You will still be obligated to repay the loan as well – the bank will resell the car and you’ll have to repay the difference.

You may determine that trading your car in for a less expensive one is your best option. This might lower your monthly payment, but you will still have to repay the loan, since the bank will just roll over the balance of your current loan into your new loan. This is what’s called being “upside down,” and it’s likely it will take you even longer to pay it off.

Selling the car and then taking out a personal loan to cover the difference may be your best option. In most cases, a private sell will mean you’ll get more for the car than if you sold it to a dealer.

People are also struggling to pay their monthly credit card bills in this tough economic climate. If you can’t make your payment, the worst thing you can do is to just let it go unpaid. Doing this may mean you get charged a late fee, or the card issuer may choose to raise your rate. The issuer can also report the late payment to the credit bureaus.

So what do you do instead? Call your card issuer and explain your situation, telling them when you’ll be able to make your next payment. Very often you’ll find that most creditors will extend your due date, waive the late fee and report a current payment status to credit bureaus.

But if you’ve let those bills pile up and you find there’s just no way you can catch up without help, a personal loan can be what you need. You can use a personal loan to consolidate your debt into one payment, and often at a lower interest rate.

Remember: When it comes to debt, it must be repaid, or your credit will suffer. This means that you, too, will suffer. Do whatever you can to keep your cost of credit low and preserve your good standing.