A key aspect of financial wellness is to avoid spending above your means. It may be tempting to apply for an auto loan to buy a more expensive vehicle, but keep in mind that falling behind on payments not only harms your credit, but also leaves your vehicle at risk for repossession.
It’s important to stay up to date on all payments. Be sure to pay in full and on time each month. Remember, if you are late or miss a couple payments there may be additional interest or late fees owed to bring your account current. Until these fees are paid, your account is still overdue, even if you pay your next payment in full and on time.
Follow these steps to ensure that your account is current.
Request Payment History
Contact the lender and ask for a complete loan payment history. You may be able to access this information online through your account, otherwise, you can write a letter.
The lender’s records will show the amount of each payment you have made, the date on which they were applied to the account, and any additional charges, such as interest or late fees. Review the records to ensure everything appears accurate. Address any overdue payments and late fees as soon as possible. If your account is delinquent, the lender can repossess the vehicle without prior notice.
Keep a Record of Auto Loan Payment History
Moving forward, keep a detailed record of your auto loan payments. Your personal records should include the payment date, amount, method of payment, and the date it was applied to the account. Detailed records will keep you on track with payments to ensure you don’t fall behind, and are also useful in the event that the bank or lender makes an error.
What to Do if You Fall Behind on Payments
It’s common to experience financial hardship, whether it’s due to job loss, divorce, health issues, or a death in the family. If you’re having difficulty making payments in full and on time, contact your lender. The lender may be willing to defer your payments and apply them to the end of the loan term.
Be sure to request the lender provide you with a letter that confirms any changes to the loan agreement. For example, if the lender agrees to defer payments to the end of the loan, additional costs associated with the deferment will have to be paid to satisfy the loan. It’s important to have a record of any changes in terms and any additional charges you may endure due to deferment.
What to Do if Your Vehicle is at Risk for Repossession
If you determine that your account is past due and think your vehicle may be repossessed, follow these steps and contact your lender. It may still be possible to avoid repossession if you’re able to pay off some of the overdue balance.