Have missed a car loan repayment and now worry about the consequences? It may happen to everybody. You don’t need to panic but remember to act fast.
Here is what you should think about. Thirty days after its due date your car payment may be considered delinquent on the credit report. And as you know, your credit score is important when applying for any loan or refinancing.
So, if your credit score is hurt, it can decrease your chances of getting approved for the future loans and refinancing your car.
Bonus: Read why you need to be careful with a long-term auto loan.
Even worse, if you have several missed payments in a row, it may lead to repossession. More than that, some car lenders have even established a new technique to remotely disable cars after just one missed car loan repayment.
Your reasons for not paying the loan can be different – whether you can’t afford to repay in full at the moment or just forgot to make the monthly payment. Here are the simple yet important steps to make in order to get back on track and start with an honest conversation with your car lender in an attempt to limit the damage.
Know the Situation and How Much You Can Pay
In case you just forgot to make the car loan repayment or lost your repayment schedule for a car loan but can afford to cover it, then there is nothing to worry about. Skip this step and move on to the second one.
However, if you are currently having a hard time and financial difficulties, begin with a small research.
- First of all, you should know your car loan details in order to make sure you understand the interest rate, your car loan balance as well as the term of the loan. Make sure you check if you will have to pay a fee for missed or late payment.
- Secondly, understand how much you can pay. You may use special car loan repayment calculators to review your budget and define what expenses you can trim in order to put more money toward your car loan repayment.
It’s a pity if you don’t have a budget yet, so try to start having one as soon as possible. You will notice how your overall financial difficulties will slowly melt away if you try to save some extra money each month and live a debt-free month.
After you’ve identified how much cash you can pay on a monthly basis, have a closer look at your general situation. Is it only one month that is tough to repay or is your car loan payment a continuous problem?
If you want to avoid similar problems in future, try to keep your car expenses – including insurance, loan payments, maintenance, and gas – at no more than 20% of your income.
Bonus: Check what is the best car insurance for young adults.
Consider Your Options
The future of your car loan repayment process depends on whether this was a one-time missed payment or a serious issue meaning that the loan is unaffordable.
In case you can afford the payment and simply overlooked to make a monthly payment, don’t hesitate to call the lender and pay off as soon as possible. Otherwise, you will have to pay a late fee. Setting up automatic payment program will help you avoid missed payments in the future.
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One-time late or missed payment is not a very serious issue and taking the initiative to communicate and make an effort to solve it will make the majority of lenders forgive you.
Generally, the common solution for such payments is a loan deferment. Then, all the late payments are taken to the end of the loan period, after which you will typically only have to pay the interest owed these months.
On the other hand, if you can’t afford the car loan payment you need to seek a deferment first. It will be beneficial for you and help prevent credit score damage, credit report ding or repossession.
After that, start searching for long-term loan solutions, such as trading in your car or refinancing. Your lender may offer these options if you have several late or missed car loan repayments.
Call Your Lender
Once you understand what you can afford to pay and what the possible options are, it’s time to call the lender and explain your situation. Ask them for any other prospective solutions, such as deferment.
Photo credit: Pixabay.comDon’t be angry or defensive. Instead, speak kindly and remember that you are the one who is asking for help.
Prepare a good and persuasive story about how you are going to change the situation and be able to pay your loan next month.
For instance, if you’ve just lost a job and can’t pay the loan this month, but already found a new one starting next month, get your employment verification ready to show to the lender.
P.S.: Get a personal loan by phone!!