If you have a high monthly car payment and have hit hard times, you may have asked “what happens if I miss a car payment?“ Car payments are a fact of life for millions and millions of people. The vast majority of people that “own” cars have a car payment. If you got caught up in the moment and signed on for a car payment that’s too high, maybe you used to have less bills and now your situation has changed, maybe you were married and got a divorce or maybe you used to have a higher paying job and now you find yourself wondering what will happen if you miss a car payment.
Whatever the reason you may be in the situation you are, it’s, as you may know, not such a good place to be. If you are late on, or miss a car payment completely, the lender will probably contact you to find out what is happening. Did the payment get lost in the mail? Did you forget? If the lender contacts you and inquires about your missed car payment they may or may not have leniency on you; it’s all up to them. Assuming they do not have leniency, they will likely report a late car payment to the credit bureaus and also request that you get caught up. If you get caught up within short order and do not have this problem again they probably will let it go and you can go on with your life. One missed payment will not be the end of the world as far as your credit is concerned. It may drop your credit score some, especially if you have a high credit score, but life will go on.
If you stay behind in your car payments or continue missing car payments, not only will your lender report these late or missed car payments to the credit bureaus causing a drop in credit score, but you will also become in danger of having your car repossessed. A repossession is when the lender determines that you are in default of your agreed upon terms and it is no longer beneficial for you to possess the collateral. They will then pursue whatever means necessary to regain possession of the car. Once they repossess the car they will sell it to the highest bidder. When a lender sells a car that has been repossessed, they will wholesale it, this results in a sale for far less than the retail value. If the amount on your car loan is not satisfied by the sale of your car, you will still owe this amount. The lender may then show this amount still due on your credit file and take you to court for the balance.
Repossession is a very negative mark on your credit. It will be hard to get a loan through tradition finance if you’ve had repossession. If you’ve had a repossession, you will probably need to seek assistance from a special finance manager instead of just going into any old dealership.
To avoid any of these problems, make smarter choices. You can’t avoid all catastrophe completely but be smart not only when you shop for a car by getting a car that is not more than 18% of your gross monthly income, but by avoiding finances on the edge. Save money in case the “what if” happens. Don’t go out and buy ANYTHING that you don’t need until you have a safety net for at least a few months. Bad things DO happen and seem to happen more to the unprepared simply because they are UNPREPARED when it does happen.
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