How Late Can You Be on Your Car Payment?

With the cost of living constantly rising, it is easy to find yourself short on cash when it comes to making your monthly car payment. This can be a high-stress situation. For most people, their car is a necessity. They need it for work, getting groceries, transporting the family, and just to function in their day-to-day life. Despite how inconvenient losing your car would be, most people only have a minimal understanding of how late payments work. In this guide, we’ll walk through exactly how late you can be on your car payment and what will happen after that point. 

When Is a Car Payment Considered Late?

Almost everyone has done it. You’re enjoying your day when suddenly it hits you: you forgot to make your car payment. Queue a panicked rush to your laptop or phone to make the payment as soon as possible. Once that date has passed and you haven’t made a payment, it is considered late. However, this might not be as big of a deal as it first seems. In fact, in the situation we just described, it’s possible you’ll face no penalties at all. This is due to the grace period that most lenders have when it comes to car payments.

Grace Period

It may surprise you that lenders are actually more understanding than people give them credit for. Lenders do not want to waste time pestering people for payments they were going to make the next day regardless. For this reason lenders often institute a grace period. A grace period is a window of time after the payment due date when you can still make a payment without being penalized.  Some lenders provide a grace period of 10-15 days. You will have to check with your specific lender to know the exact time frame.

Late Payment Reporting

One of the biggest fears in regards to late car payment is having it affect your credit score. Lenders will report late payments to credit bureaus. This will show up on your credit report and can negatively impact your credit score. Having late payments on your credit report can make it more difficult to get loans, credit cards, or even rent an apartment. Late payments can stay on your credit report for up to 7 years, making these far-reaching consequences. Typically, lenders will report to credit bureaus when the payment is 30 days late. 

Late Fees

Late payments can result in late fees being incurred. Usually, this only happens after the above-described grace period passes.  Late fees for car payments are usually $25-$50. You will have to read over your specific loan agreement.  If you are already struggling to make car payments on time, you should avoid late fees at all costs. They will only serve to compound the problem and make it more difficult to make future payments on time. 

Communicating with the Lender

If you know you are going to be late on your car payment, the best thing you can do is get in touch with your lender. Proactive communication shows that you are committed to repaying the loan and will make the lender more likely to work with you. Some options they may offer include:

• Extending the due date of your next payment, allowing you to pay it at a later date without any consequences.
• Modifying your payment plan so that your monthly payments are lower and more manageable.
• Temporarily postponing payments, which can lower your monthly payment but increase the total cost of the loan and lengthen its term. 

If you come to any of the above agreements with your lender, be sure to get it in writing. You want to make sure everything is official so that they cannot claim that you haven’t made the agreed payments. 

Risk of Reposession

Repossession is when the lender seizes your car to sell it in order to pay the balance on your loan. Repossession has the potential to throw someone’s life into disarray. Technically, a lender can begin the repossession process immediately after a single missed car payment, but this is extremely rare. Most lenders will not begin the repossession process until approximately 90 days after non-payment. Once again, you should check your loan agreement. It may outline exactly when the lender will begin the repossession procedure. 

Is Bankruptcy an Option?

Bankruptcy is an option if you are struggling to make your car payments. Chapter 13 Bankruptcy is usually the best option, as it will prevent the car from being repossessed or it may be able to provide you your car back even after it was repossessed.  Chapter 13 can also help to restructure your payments to make them more affordable by either cramming down (paying the lender only what the vehicle is worth and not what you owe) and/or stripping down the interest (paying the lender a court-approved “reasonable” interest rate and not the high rate imposed on you)   On the other hand, Chapter 7 Bankruptcy is used more to eliminate your liability on the car and allow you to obtain a fresh start.  Before making any decisions, you should consult a bankruptcy attorney. We can help you determine which option is the best for you.