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What happens when you default on a car loan?
My budget is incredibly tight this month. I have to prioritize which bills and expenses I can afford. My car loan is one of the most expensive costs I have each month, but what happens when you default on a car loan?
Jack Walsh · Updated on
Reviewed by Shannon Martin, Licensed Insurance Agent.
I’m sorry to hear about your financial situation. You should try your hardest to keep up to date on your
car loan
payments. When you default on a car loan, the lender could repossess your vehicle and your credit score will be negatively affected. Fortunately, most lenders will work with you to figure out a solution rather than repossess the vehicle. That said, any late payments or delinquency will stay on your credit report for seven years.
If you’re struggling to make your monthly payments, contact your lender immediately and before you miss a payment if possible. Reaching out to find a solution before defaulting shows you’re working in good faith. The lender may be more understanding and willing to help.
Additionally, if you constantly struggle to make your monthly payment, you should consider
refinancing
your loan. When you refinance, you sign a new loan agreement with updated terms that make repayment more manageable. On average, car owners pay $85 less every month by refinancing their auto loans. See if refinancing will save you money with the
Jerry
app. View full answer
- Gregory R.
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Jerry partners with more than 50 insurance companies, but our content is independently researched, written, and fact-checked by our team of editors and agents. We aren’t paid for reviews or other content.
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