Are you financing your vehicle? You’re not alone. Because the overall cost of purchasing a brand-new car has increased significantly over the last few years, millions of Americans are opting to finance their cars.
Before your auto loan was approved, you would have signed a contract and agreed to certain terms. One of the terms of your auto loan contract was to pay your lender a certain amount of money every month.
So, what will happen if you fall behind on your car loan payments?
Your car lender will contact you
If you miss one car payment, your lender will most likely give you a few days to make the payment. You might receive an additional fee for being late. However, if you miss a number of payments consecutively, your lender will get in touch to know why they’ve not received their payment. Usually, lenders will email, call or send letters to warn you about the consequences of missing payments.
Your credit score may be affected
While your lender will give you a grace period to catch up on your monthly payments, this period isn’t usually that long. If you don’t make your payment, your lender may report to credit bureaus. When this happens, you may lose some points on your credit score.
Your car might get repossessed
Lenders expect that you will respond to their notifications and make payments. However, if you continue missing your car payments without communicating with your lender, your car may be repossessed. Remember that an auto loan is typically a secured loan that uses the car as collateral. For this reason, your lender can legally repossess the car if you don’t make your monthly payments.
Bankruptcy can make your car payments more manageable
There are many reasons why your car loan payments may suddenly become too much for you. However, whether you have had a change in life circumstances or have other overwhelming debts, filing for bankruptcy may help you avoid aggressive collection efforts.