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Auto loan delinquency occurs when you haven’t made your car payment within a certain time frame after the monthly due date, usually 30 days. That’s the point when most lenders consider a payment delinquent and report it to the credit bureaus.
Many lenders have a grace period, usually 10-15 days, when you can make the payment after the due date and avoid any late fees. During that time, the lender will consider the payment late, but it isn’t usually reported to credit bureaus until the payment is 30 days past due. You can find information about your lender’s grace period and late fees in your loan agreement.
If you’re struggling to make a car payment, it’s best to contact your lender and let them know before the 30-day mark. In many cases, they will work with you, so you can avoid the negative effects of having a delinquent auto loan.
What are the consequences of being delinquent on a car loan?
If you haven’t made previous arrangements with your lender and simply don’t make your car payment, you can expect to be contacted by your lender’s collections department. This notification reminding you to pay may be by phone or mail, depending on the lender and how late your payment is.
At 30 days late, or soon after, your past-due payment will be reported to the credit bureaus — Experian, TransUnion and Equifax. Having a delinquent payment reported will likely lower your credit score and can affect your ability to get future loans and lower interest rates.
Most lenders consider auto loans to be severely delinquent at 60 days late, and this can have an even greater impact on your ability to qualify for future credit.
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Is auto loan delinquency the same as auto loan default?
Auto loan delinquencies and auto loan defaults aren't defined in the same way. Auto loan delinquency only means you’re late making the car payment. When your lender believes that you aren't going to make a payment at all, your auto loan will enter default. This usually occurs after 90 days of no payments.
When your lender considers you in default on your loan, it may start the process of repossessing the vehicle. Then, the lender will sell the repossessed vehicle, and if the car sells for less than your loan balance, you will be expected to pay the difference along with other fees. Also, a repossession will stay on your credit report for seven years, resulting in longer-term damage to your credit.
What to do when you can’t make your car payment
The best time to address a late car payment is before it’s actually late.
Your first step is to let your lender know that you’re going to have trouble making the payment on time. They will ask for some details about why you’re unable to make your payment, like if you lost your job or had a medical emergency. The lender may have resources like a hardship program to help you. They also might be more willing to adjust your loan terms if you’re proactive and talk to them early versus after you're already delinquent or in default on the loan.