Borrowers who can't pay a monthly auto loan payment may ask their lender to defer one or more car payments. If your lender agrees to defer payments, this means your lender allows you to skip car payments during a specific time period without penalty. Deferred monthly payments extend your loan term.
When to Request Deferred Payments
Ask to defer your loan payments as soon as you realize you can't make your monthly payment. Some lenders require that your auto loan be in good standing to grant a deferment. Before you're behind on a payment, ask your lender to help you. Some lenders may require several months of timely payment history. If you wait past 30 days to request a payment deferment, the late payment shows up on your credit report, which lowers your credit score. Get your deferment agreement in writing and save it for your records.
Benefits of a Deferral
Your lender may offer one or several months of payment deferment. Suspending your loan payment might help you get past financial hardship. As long as your monthly payments aren't more than 30 days late before the deferment, you'll also avoid the negative impact that late payments have on your credit score. If you're still unable to make payments at the end of the deferment period, you might decide to refinance your loan. To obtain a refinance approval, you must be up-to-date on your current loan payments, another benefit of payment deferment. A new lender won't know that you deferred car payments when reviewing your credit report.
After the Deferral Period
At the end of your deferral period, continue paying your loan payments on time. If you still can't make your monthly payment, ask your lender to change your loan's due date. Some lenders may change a due date by several weeks, meaning your payment won't be reported late to the credit bureaus until 30 days after the new payment date. If this option still doesn't help you, consider selling your vehicle before your next payment is due to avoid repossession.
Loan Modification
While you're arranging to defer your loan payments, ask your lender if it offers loan modification, which extends your loan term agreement. Modifying your loan may create a lower monthly payment responsibility. Your interest rate might increase, but you can always pursue a refinance once your financial situation improves. You might have to submit a new credit application or provide proof of financial hardship, such as an unemployment approval statement. If your lender agrees to modify your loan, expect to re-sign your loan contract.
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