Car Loan Default vs. Delinquency

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Megan Foukes is a recent graduate from Indiana University who graduated with a bachelor’s in journalism. Megan works as a content writer for Auto Credit Express and contributes to several automotive and finance blogs.

, - February 4, 2020

Car loan default may sound similar to car loan delinquency, but they’re not the same thing. Both affect your credit score negatively, but before your auto loan can be in default, your monthly payment first need to be delinquent.

Delinquency vs. Default

Defaulting on a car loan and being delinquent don’t carry the same weight in terms of the consequences. When you’re delinquent, it means you’re not making your monthly payment on time.

Generally, you have 30 days from the due date before serious actions occur, but that doesn’t mean you’re off the hook. You’re charged a late payment fee, and are required to make the missed payment plus the fee.

If you fail to catch up on your monthly car payment, you run the risk of defaulting on your loan. Once you default, the lender can repossess your vehicle without warning.

In addition to the negative marks on your credit by being delinquent, having a repo listed on your credit reports – a consequence for defaulting on your auto loan – brings your credit score down even further.

How to Prevent Being Late on Car Payments

If you think you might miss your next loan payment, you need to reach out to your lender as soon as possible. Let them know what’s going on, explain your fear of missing your next payment, and ask what options are available to prevent being delinquent.

Depending on what your lender is willing to do, you have four options to choose from:

  1. Refinance – The main goal of refinancing a car loan is to lower your monthly payment. If you’ve had your loan for at least a year and your credit score is good, or at least has improved since taking out the loan, you may be able to refinance. This would allow you to either qualify for a better interest rate and/or extend the loan term, both of which lower your monthly payment. However, keep in mind that you have to be current on your existing loan in order to refinancing.
  2. Defer the payment – If your lender allows it, you may be able to defer the payment and tack it on to the end of the loan term, or have it added the next monthly payment. You still have to pay it, but if you need a temporary loan deferment to get back on track, this could be your answer.
  3. Surrender the vehicle – If your lender isn’t able to help you out and you aren’t able to make the next payment, you could surrender your car. This is considered a voluntary repossession, and a repo is still listed on your credit reports. However, you avoid the fees associated with the repossession process.
  4. File for bankruptcy – As a last resort option, if you’re struggling with finances across the board, you could file for bankruptcy. When you file for bankruptcy, an automatic stay is implemented, and your lender can’t come after you or your vehicle while the stay is in place.

The Bottom Line

It’s important you keep up with your car payment to avoid being delinquent and defaulting on the loan. If at any point you think you’re going to miss a payment, talk to your lender before it’s too late. You never know what they can do for you.

If you lost your vehicle due to repossession and need a new one, let CarsDirect help. We're teamed up with a nationwide network of special finance dealerships that have the lending resources available to assist people who are struggling with credit issues.

Get the ball rolling today by filling out our free and easy auto loan request form. Once you do, we'll work to match you with a local dealer. There's never any obligation, so don't delay, get the process started right now!


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Megan Foukes is a recent graduate from Indiana University who graduated with a bachelor’s in journalism. Megan works as a content writer for Auto Credit Express and contributes to several automotive and finance blogs.

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