What Happens If I Miss a Car Payment?

Pulling off the lot in a new or new-to-you car is a great feeling. One thing to keep in mind is that not long after that, your car payment is due. Budgeting for these payments and getting on autopay is a good way to stay consistent. But what if the due date comes and goes, and you forget to transfer the funds? What happens if you miss a car payment?

You may need to pay late fees

Typically, the first thing that happens if you miss a car payment is that you’ll be hit with a late fee. This fee represents a portion of the amount you were supposed to pay—usually 5% or between $25 to $50, depending on your loan. A late fee here and there may not seem like a big deal, but these costs can start to add up fast.

You may see a negative hit to your credit score

Your credit score is a measure of your accountability as a borrower, and missing car payments could impact your score in a big way. Even one missed car payment could lower your score dramatically, and that negative mark will stay on your credit report for 7 years. Credit takes time to rebuild—make every payment on time to keep your good standing intact.

You may get collection calls

If you fail to pay your debts on the due date, your lender will likely begin pursuing collections activity on your account until you pay what is due and bring the account current. Getting called by a debt collector is never fun. You might also receive letters from your lender or a collection agent, requesting full or partial payment for any overdue or outstanding amounts owed.

You may get payment plan offers

If you’re missing payments but communicating with your lender about financial hardship, they might offer to help you get caught up. In some cases, a lender may offer to forgive any fees you’ve accrued. In other situations, they might extend the term of your loan to lower the monthly payment amount. Payment plans and debt restructuring could be a much-needed lifeline if you can no longer afford your car payment—just make sure the new terms fit into your budget.

You may face repossession

If you miss too many car payments, your lender could repossess your car. In other words, they’ll take your car away and sell it, and apply the proceeds to the amount you owe, minus fees. You will still be responsible for the delinquent amount, and the cost of the repossession, interest, charges, and fees. Vehicle repossession is obviously a worst-case scenario, and it’s one most lenders want to avoid altogether. It’s important to communicate with them as soon as you get behind, to work out a plan that’s beneficial to both sides—one that doesn’t end in repossession.

Missed a car payment? Don’t wait to reach out to your lender

Missing car payments can have serious consequences. If you find yourself struggling to make your car payments, don’t wait to talk to your lender and explore your options. You might be able to defer your payments for a short time or refinance your loan to make your payments more manageable. You won’t know your options unless you communicate.

The longer you wait to address a late car payment, the worse the consequences will be. Work to make your payments and stay on solid financial footing. Whatever you do, don’t ignore the problem of a missed car payment and hope that it goes away.