Maybe you had to make an emergency home repair. Maybe your hours were cut at work. Regardless of the reason, you missed a car payment. The good news is that if you make your payment along with any late fees you owe, you can get back in good standing with your lender. Things get a little more complicated if you are no longer able to make your car payment at all.
TL;DR (Too Long; Didn't Read)
If you make your car payment past the due date, you'll most likely have to pay a late fee. It is always wise to call your lender immediately when you know you can't make your payments on time.
Talk to Your Lender
Your lender may offer a grace period on your car loan. That means you have some extra time before any late fees are assessed. Each lender has their own rules, so you’ll need to contact your lender to find out if your loan has a grace period. If so, as long as you make your payment by the end of your grace period, your loan will stay in good standing, and you won’t be charged any fees.
If your lender doesn’t have a grace period, they may still be willing to work with you. Let them know why you’re having trouble making payments. They may be able to temporarily lower or postpone payments. Keep in mind that once your payment is 30 days past due, your lender will report your account to credit bureaus as delinquent, which can hurt your credit score.
If You Can’t Make Payments
If you can no longer make payments, you have a few options. One option is refinancing your vehicle so you have lower, more affordable payments. Talk to different lenders to see which one provides you with the lowest interest rate and monthly payment.
Another option is to sell your car. Check online to get a sense of how much your car is worth and then compare it to how much you owe. Ideally, you want to be able to sell your car for enough money to pay off your loan. If your car is worth less than the loan and you sell it, you’ll still owe the lender the balance of the loan. If you’re going to sell your car, you may want to work with a dealer. Selling a car when you don’t have the title can be complicated, and dealers are better equipped to handle those complications.
You can also surrender your car. Surrendering your car will show as a negative item on your credit report, but it’s better than having your car repossessed unexpectedly. When you surrender your vehicle, your bank will auction off the car. If there’s any balance left after the bank sells your car, you’ll be responsible for paying it off. For example, if your loan had a balance of $15,000 and your car sells for $10,000, you’ll owe $5,000.
Repossession of Your Vehicle
The worst case scenario, if you don’t make payments and don’t communicate with your lender, is repossession. A tow truck will come and pick up your car without warning. They may pick it up at your home, at work or from any other location where you may park it.
If your lender has repossessed your car, you may be able to work with your lender to get it back. You will need to bring your loan up to date and pay any additional fees. These fees may include late fees, a fee for the tow truck and fees for storage. If you don’t get your car back, the bank will auction it off and you’ll be responsible for any balance.
Melinda Hill Sineriz is a freelance writer with over a decade of experience. Her work has appeared on Pocket Sense and Sapling. She specializes in business, personal finance, and career writing. She has worked in insurance sales and financial planning, helping families to manage their money and prepare for the future. Learn more about her and her work at thatmelinda.com.