When buying a car, you may have trouble paying for your car payment at some point throughout the process. If you cannot afford to make your car payment, you must deal with the consequences that come with this situation. Eventually, you may end up losing your car and damaging your credit.
Collection
Once you are late on your car payment, your auto lender will typically start trying to contact you immediately. This could happen as soon as one day late or it could happen a few weeks after missing your first payment. You should start receiving phone calls from the lender and you may also receive some letters in the mail. It is usually in your best interest to talk to the caller to let them know that you are having some financial trouble, but you hope to make the payment as soon as possible.
Repossession
After a certain length of time of missed payments, your lender will typically try to repossess the car. This involves hiring a repossession agent to come and take the car from you when you are not around. You may walk outside your house and find that your car is gone. This can make your situation very difficult because you may not be able to get to and from work to pay your other bills. If you can work out a payment arrangement before this point, it is to your advantage.
Damaging Your Credit History
Besides losing your car, this process can also significantly damage your credit. When you start to miss payments or make late payments, the lender will start to inform the credit bureaus. When you default on the loan and have your car repossessed, this will be reported as well. The damage that this causes to your credit history can make it difficult to obtain any other kind of financing in the future. Your score will be lowered, but with some careful planning, you can build it back up again.
Avoiding Problems
In this situation, you have a few different options to consider if you want to avoid problems. For instance, you might try to refinance your auto loan with another lender. This would allow you to pay off your loan that is late and start a new payment schedule. Your current lender might offer you a repayment plan or a loan extension. If the lender extends the term of the loan, it can help you get a more affordable car payment.
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