Let’s face it. Anyone who’s seen Operation Repo knows ultimately what happens if you don’t pay your car payment, but of course your car doesn’t get repossessed immediately. So what happens in between your first missed payment and the time they send someone out to get your car?
That’s what we’ll explain below.
But first, here are the steps you should take before you miss a payment…
What To Do If You Can’t Make a Car Payment
Believe it or not, the best thing to do first (if you believe you’ll be able to keep making payments in the future) is contact your lender and ask if you can modify your repayment plan. When you get them on the phone you can tell them the following:
1. You won’t be able to make a payment this month. (If you’ve never been late before, be sure to tell them that)
2. You will be able to make a payment soon, but need a modified repayment plan.
3. Ask if they can let you go one month without a payment or possibly reduce the payment amount for a few months.
4. Ask if they can waive your late fee.
Some lenders may be willing to let you pay less for a few months or even skip a payment (known as deferment) – but the amount you defer will be added onto your loan balance, meaning you’ll pay more interest in the long run. That’s certainly better than losing your car entirely and damaging your credit score (which is what happens when a car is repossessed).
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Another option might be to refinance your loan. Refinancing can help to lower the monthly payment you’re expected to make. However, you’ll probably need a relatively good credit score to make that happen.
But what if you can’t pay the payments anymore – not now and not in the future? This is a common situation when people lose their jobs or have their income reduced. In that case, your best choice may be to sell your car entirely. And if you have an alternate means of transportation, selling the car should ease your stress and give you a way out of a difficult financial situation.
A final option, which may be quite unpleasant, is to “turn your keys in” – which means giving the car back to the dealer voluntarily. Keep in mind, even if you do this, you will still owe the difference between what the car is worth and what you still owe on the car loan.
What Happens If You Miss One Car Payment
Okay, let’s say you’ve missed one car payment already. Now what? Well, if you’ve never missed a payment before, the first thing that will probably happen is your lender will call you and ask why you didn’t make the payment. They will want to find out if you expect to be able to make the payment in the near future. If you can assure them that you will make the payment soon, they may be able to help you modify your payment plan as discussed above.
There is also a high likelihood that you’ll be charged a late fee or penalty.
Is there an impact to your credit score? Well, not right away. Usually, the lender will not report your missed payment to the credit bureaus immediately. So there may still be time to get the situation resolved before your credit is hurt. But that window only lasts for a short time…
What Happens If You’re 30 Days Late On a Car Payment?
Once you’re 30 days late on your car payment, the consequences get more serious. For one thing, the lender may report you as delinquent to the three major credit bureaus – Experian, Equifax, and TransUnion – and you will get several calls from your lender to persuade you to pay the amount you owe.
In many cases, these calls will increase as time goes on until you are more than 90 days late.
What Happens When You Are 90 Days Late On a Car Payment?
After 90 days without paying your car loan, your lender may declare you to be in default on the loan. After your loan is in default, it will be sold to a debt collection agency for a fraction of the total balance of your loan. At this time, the repossession process will also begin, which means the lender will send out someone to reclaim your vehicle.
If your car is repossessed, keep in mind that you have a right to save all your belongings inside the car. Even if the car is taken when you’re not around, you have the right to ask the lender how to get back any of your property that was in the car at the time it was repossessed.
So what should you do if your car is repossesed and you can’t pay the remaining balance on the loan? There are several options for getting out of debt that you should research. Depending on how much total debt you have, it might make sense to work out a repayment plan (ReadyForZero can help with this!), or try to save up enough money for a lump sum settlement, or file for bankruptcy. You can talk to a reputable credit counselor for advice on how to proceed.
So… what happens if you don’t pay your car loan payment? As you can see, the answer depends on whether you can make the payment in the near future. Hopefully the information above can help you avoid the worst outcomes, like having your car or truck repossessed. The most important thing to keep in mind is if you feel you cannot continue making payments, take action immediately to try to resolve the situation rather than simply waiting or ignoring the problem.
And as always, if you have any specific questions, just let us know in the comments below!
Image credit: Stradablog