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Making car payments on time may have been manageable when you first took out your loan, but life can change fast. A sudden job loss or an unexpected medical crisis can quickly leave you wondering, “How late can I be on my car payment?”
The good news is — while the negative consequences of missing car payments can escalate quickly, there are ways to avoid them. Lenders are often willing to work with you if you reach out early, or you may be able to lower your payments through a refinance.
Read on for a breakdown of what to expect when you miss a car payment and how to minimize the damage.
Missing a car payment is generally going to have negative consequences, which can include a late fee, collection calls, credit score damage, or possibly your vehicle getting repossessed. However, the consequences you experience will depend on your lender’s policies and how long it takes you to make up the payment.
For example, if your lender offers a 10-day grace period and your payment is five days late, you may avoid the late fee and any further repercussions. On the other hand, if you never make your payment and your lender repossesses vehicles after 90 days, you’ll likely lose the vehicle within a few months.
If you end up paying your car payment late without making arrangements with your lender, here’s a timeline of the common consequences that may follow:
While these are common consequences in the industry, each auto loan lender has its own policies and practices. To understand what to expect in your specific situation, it’s best to contact your lender or read your loan contract.
Missing a car payment can have both immediate and lasting consequences. Here’s a closer look at what can happen in the short- and long-term.
The first consequence you’ll likely encounter when you miss a car payment is a late fee. Late fees are set amounts, often somewhere between $25 and $50, that are charged if your car payment is made after your due date. Lenders may apply the fee immediately or offer a grace period.
When a grace period is given, you’ll only incur the fee if your car payment remains unpaid after the grace period ends. Since late fee policies vary between lenders, you’ll want to read your auto loan contract to see how late payments work with your loan.
Once a car payment is late for 30 days, lenders may report it to the consumer credit reporting agencies: Experian, Equifax, and/or TransUnion.
When that happens, the missed car payment will be recorded on your credit reports, where it can remain for up to seven years. Unfortunately, that will typically lead to a significant drop in your credit scores and can hurt your ability to get credit in the future.
Beyond your first missed payment, lenders will continue to report your payment activity to the credit bureaus each month. If you continue to miss car payments, your reports will show each missed payment and how late it is. The more missed payments you have and the later they are, the worse it is for your credit.
You should also expect collection attempts from your lender. You may receive notices by email, mail, and phone, which gradually get more frequent and urgent. They often start as reminders for your late car payment and transition into warnings about upcoming consequences.
The final step is the lender giving up on collecting payments from you and repossessing your vehicle. While they may be able to do so legally after one missed payment, it’s often a last resort that happens once loans are at least 60 to 90 days late.
If your lender decides to move forward with a repossession, someone will come to your home and take possession of your vehicle. That pick-up generally comes with a fee that’s added to your debt.
From there, the lender can sell the vehicle. If the vehicle is sold and the sale price is less than the amount you owe, you’ll be responsible for the remaining balance. However, if it’s sold for more than you owe, you’ll receive the difference. The repossession will also be recorded on your credit reports, where it’ll stay for seven years.
Laws on repossessions vary by state. For example, some states require lenders to provide you with a certain amount of notice while others don’t. Further, some have restrictions on how they can take the car, such as whether they can remove it from a closed garage without permission or not. If you think a repossession may be in your future, check the laws in your state to learn your rights.
The thought of missing a car payment can trigger stress, but there are steps you can take to minimize the damage. Start by contacting your lender as soon as you foresee missing a payment. Explain your situation and ask about the company’s hardship programs. In many cases, auto loan lenders offer payment extensions, deferrals, or car loan modification.
If you need a more permanent solution, consider refinancing into a new loan. Refinancing can sometimes result in a short break from payments and a lower monthly payment amount. But again, time is of the essence. Your ability to get approved for a new loan with a lower payment depends on your creditworthiness. Ideally, you’ll want to apply before a late or missed car payment hits your credit reports.
Shop around for lower monthly payments with RefiJet (without hurting your credit score)!
Find answers to frequently asked questions about late car payments.
The answer to this question depends on the consequence you want to avoid. You could face a late fee when your car payment is just one day late. However, lenders won’t typically report a late payment to the credit reporting agencies until you’re 30 days late. Further, they often won’t repossess a vehicle until around the 90-day mark.
Lenders typically report late payments to the credit reporting agencies once they’re 30 days late. To be safe, you’ll want to make your payment as soon as possible, but no more than 25 days after your due date.
If you miss a car payment, you should make it up as soon as possible. If it’s going to take some time, contact your lender to let them know. They may be willing to help you avoid negative consequences, like late fees and credit score damage.
Refinancing can offer a short break from your payments and may help you get a lower monthly payment amount. However, it can be hard to qualify for lower payments if your credit reports show recently missed payments. That said, it doesn’t hurt to shop around to see what rates and terms you can get.
Not sure what’s in your car loan agreement? Break down key terms, fees, and interest rates to ensure you’re getting the best deal.
