What Happens If I Miss a Car Payment?
What Happens If You Miss a Car Payment?
If you financed or leased your vehicle in plain and simple words, you cannot afford to miss a single monthly car loan payment. The late fee/late payment for missing a payment is going to be the least of your worries because even a single missed payment will be devastating to your credit report.
Some lenders have a grace period if you have a good payment history but in the worst case scenario, your car may be immediately repossessed by the lender’s repo man.
When you sign the purchase, lease, or auto loan finance agreement on a car, you usually give the lender a “security interest”. This means that the lender has the authority to legally repossess it without giving you any notice if you default on the loan.
Even though your car has been taken away, that doesn’t mean that your current auto loan obligation goes away. You are still obligated to pay off the entire balance that you owe on the car. And, if the proceeds from the car’s sale are not enough to cover the balance you owe on the car, the remaining portion (called a deficiency balance or loan balance) will still be due, and the lender can sue you to collect it.
Getting your Car Back
You can usually get back (or “redeem”) your car if you pay the lender the entire balance owed along with any accumulated arrears and repossession costs. But you must continue making your regular payments or the car will be repossessed again. You can bid to buy the car at the auction, but even if it is sold, you are still liable for any deficiency balance.
As soon as you know you are going to have to make a late car payment, it’s vitally important to speak directly with the auto lender before the payment is missed. You must find out what your options are before you default on the loan. A good option to avoid this is to setup automatic payments from your bank account.
Don’t feel uneasy about telling your lender that you will have trouble making a payment. They need to know this so the situation doesn’t present itself to them unexpectedly. Then, you must work out some sort of arrangement that are both comfortable with.
Your Credit Score will Plummet
In addition to losing your car when you miss a monthly payment, your credit rating will suffer a devastating blow in the short and long-run. Your bad credit information will be kept by the financial institutions and credit bureaus like Equifax and TransUnion for up to seven years.
Meanwhile, all of your other current and future lenders will view you as a major credit risk, which will affect the interest rate you pay on loans and your ability to get new credit or even a new credit card.
What are your options?
Negotiate with your lender and see if they are open to extending the length of your loan to reduce the monthly amount you need to pay. Even though a longer loan term will probably mean additional interest charges, it’s a bitter pill you must swallow.
If the reason you’ll miss or make late car payment past the due date is only going to last for a short period of time, ask your lender for a deferral. This allows you to make the payment at a later date when the present personal finance crisis is over.
Check to see if you have payment protection insurance (PPI), and use it to cover at least a few payments. Another option is to trade in your car and hopefully negotiate a lower monthly payment when you finance the replacement vehicle.
If you believe you are going to miss a car loan payment, do not disregard the issue. Take immediate action by speaking directly with your lender. The consequences of doing nothing at all will be catastrophic and must be avoided at all costs. If you have any questions, please call our finance experts at Viking Motors or our toll free number (204) 376-2342 about credit repair services,
debt consolidation or anything finance or vehicle-related.
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