How Many Months Can You Not Pay Your Car Payment?

A car loan is a secured loan used to finance the purchase of a vehicle, where the vehicle itself acts as collateral. Borrowers repay the loan amount, plus interest and fees, over a set period through regular monthly payments. Making these payments on time is important for maintaining financial health and meeting loan obligations. Consistent on-time payments can help protect or even improve your credit score.

Grace Periods and Late Payments

A grace period for a car loan offers a short window after the payment due date during which you can make your payment without incurring late fees or penalties. These grace periods typically range from 5 to 15 days, though their existence and length depend on your specific loan agreement and lender policies.

Once the grace period concludes, if payment has not been received, the lender will charge a late fee. These fees can vary, often ranging from $25 to $50. Review your car loan contract for details on grace periods and late fee amounts.

Impact on Your Credit and Communication from Lenders

Missing a car payment can negatively affect your credit score, particularly if the payment becomes more than 30 days late. Lenders report payments as late to the major credit bureaus once they are 30 days past the due date. A single late payment can significantly lower your credit score, and this negative mark can remain on your credit report for up to seven years.

The impact on your credit score worsens with increasing delinquency; payments reported as 60 or 90 days late will cause more severe damage. This can make it harder to secure other financing in the future. As payments are missed, lenders will escalate their communication efforts to inform you of the overdue payment and accumulating fees. These communications become more urgent as the number of missed payments increases, signaling the growing severity of the situation.

Default and Repossession Process

“Default” on a car loan means failing to meet the terms of your loan agreement. Lenders often categorize a loan as in default after a borrower misses payments for 30, 60, or 90 days. The exact definition of default is specified within your individual loan contract.

Upon default, many loan agreements include an “acceleration clause,” allowing the lender to demand immediate repayment of the entire outstanding loan balance. This means the full amount of the loan becomes due at once. If the loan remains in default, the lender can begin the repossession process, as the vehicle serves as collateral for the loan. Repossession can occur without prior notice in many states, though lenders typically wait until payments are 30 to 90 days past due.

After repossession, the lender will sell the vehicle to recover the money owed. The proceeds from this sale are applied to your outstanding loan balance, including any repossession costs and fees. If the sale price is less than the total amount owed, the remaining debt is a “deficiency balance.” You may still be responsible for paying this deficiency balance, which can include the difference between the sale price and the loan amount, plus any accrued interest, repossession, and sale preparation fees.

Proactive Measures to Avoid Default

If you anticipate difficulty making car payments, communicating with your lender early can help prevent default and repossession. Many lenders are willing to work with borrowers to find solutions, as repossession is also costly for them. One option is to discuss deferment or forbearance, which allows you to temporarily pause or reduce payments.

Another measure is to inquire about loan modification, where the lender might adjust the terms of your existing loan to reduce monthly payments. Refinancing your car loan can also be an option to achieve a lower interest rate or a more manageable monthly payment. Voluntarily surrendering the vehicle to the lender or selling it privately could help avoid repossession costs and potentially reduce a deficiency balance.