Sometimes things come up and you miss a payment on your auto loan. While it’s not the end of the world, you do need to act quickly to avoid a negative impact on your credit and be at potential risk of a vehicle repossession.
What happens when a payment is late?
Depending on your auto loan lender and the terms of your agreement, you may incur a late fee immediately when the payment isn’t received. However, a late fee doesn’t necessarily mean the late payment will appear on your credit report.
The Credit Reporting Resource Guide provides a guideline of standards that creditors should follow to comply with federal law. Based on these standards, a late payment can’t appear on your credit report until it’s at least thirty days past due. It’s a violation of federal law for a creditor to report an account as late prior to thirty days.
What should I do if I miss a payment?
If you miss a payment on your auto loan, try to bring the account current by making all past due payments plus late fees immediately, if you’re able to. If you wait more than thirty days to pay your balance, you run the risk of the late status appearing on your credit.
If you’re able to, set up automatic payments so that you don’t miss a payment in the future. You can also set up a calendar, email, or text reminder to stay on top of bill due dates.
What if I can’t pay the bill immediately?
Unexpected life events happen all the time and financial hardships are common. If you’re having difficulty paying bills on time, it’s still important to confront the issue and take action immediately.
If you’re experiencing a short-term financial hardship that you know will be resolved soon, contact your lender to discuss your options. They may allow you to defer this month’s payment until the end of the loan. Be sure to get any changes or updates to the original agreement in writing.
What if I can’t afford my loan?
If your loan agreement is proving to be unaffordable, you should contact your lender and have an open discussion about your available options. Explain your situation and why you’re having difficulty making payments. They may allow you to defer payments for a period of time. You may want to consider refinancing or trading in your car for another, more affordable option.
What should I do if I think my car might be repossessed?
If your account is sixty to ninety days late, your vehicle may be at risk for repossession. Contact your lender if you haven’t already and prepare for a potential repossession by following these steps.
A vehicle repossession can remain on your credit report for up to seven and a half years, so it’s important to take steps to avoid this at all costs.