How Many Days Can Your Car Payment Be Late?

Car loan payments are a significant financial commitment. Understanding your loan agreement’s terms, especially how late payments are handled, helps maintain financial stability and protect your credit.

Grace Periods and Late Fees

Many car loan agreements include a “grace period,” a short window after the due date when a payment can be submitted without a late fee. This period typically ranges from 7 to 15 days but varies by lender. Consult your loan contract to determine if a grace period is offered and its exact length.

After the grace period expires, or if no grace period is provided, lenders assess late fees. These fees can be a flat amount, often $25 to $50, or a percentage of the overdue payment. Your loan agreement details the late fee amount and calculation method. State laws may also limit these charges.

Impact on Credit Reporting

A late car payment significantly affects your credit score and report. Most lenders report payments as late to major credit bureaus (Equifax, Experian, TransUnion) once they are 30 days or more past due. Payments a few days or a week late generally do not impact credit scores if made before the 30-day mark.

Once a late payment is reported, it can remain on your credit report for up to seven years. This negative mark can substantially drop your credit score, especially for those with a strong credit history. A lower credit score can make it more challenging and expensive to obtain future loans, credit cards, or even housing.

Repossession Considerations

Vehicle repossession is a severe consequence of prolonged non-payment, occurring when a lender seizes the car due to loan default. While lenders can repossess a vehicle as soon as a payment is missed, most wait until the borrower is significantly delinquent. Repossession often happens after 60 to 90 days of non-payment, though it can occur sooner depending on the specific loan contract and state laws.

Lenders are not required to provide advance notice of repossession; the vehicle can be taken from a driveway or public street. However, repossessing agents cannot “breach the peace” by using physical force or entering a locked garage without permission. After repossession, the vehicle is usually sold, and the borrower may still be responsible for any remaining loan balance, including repossession costs, if the sale price does not cover the full debt.

Lender Communication Guidelines

Proactive communication with your car loan lender is advisable if you anticipate difficulty making a payment. Reaching out before payments become severely delinquent can open avenues for discussion. It is helpful to prepare relevant information before contacting the lender, such as your account number, the reason for the payment delay, and a proposed new payment date.

While lenders are not obligated to offer solutions, open communication can lead to discussions about potential arrangements. These might include payment deferment (postponing a payment to the end of the loan term) or a modified payment plan. The outcome of such conversations varies by individual circumstances, the lender’s policies, and the borrower’s payment history.