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What happens if I default on a car loan?
I lost my job a couple of months ago and am still trying to get a new one. Money has been tight. It’s gotten to the point where I have to choose between keeping the heat on or paying my car loan. What will happen if I can’t pay my car loan this month?
Lauren Smith · Updated on
Reviewed by Shannon Martin, Licensed Insurance Agent.
I’m so sorry to hear things have gotten so rough. I definitely recommend talking to your lender to see if they can help you out during this period of financial hardship.
- Credit ding: Defaulting will negatively affect your credit score, and the negative mark may stick around for around seven years.
- Repossession: Because a car loan uses your car as collateral, the lender can take it back.
- Collections: When you default, the debt may go into collections and an agency may be tasked with trying to get the money back. Their tactics may include garnishing your wages.
It’s worth asking your lender to defer your loan. This could mean pausing it or reducing the monthly bill for a short period of time. It isn’t a permanent solution, but it can help. Because your lender would rather get some of the money you owe rather than none, it’s likely they’ll be willing to work with you.
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