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Hint: It’s not a good situation.
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A lot of people are having trouble keeping up with their bills these days. We can thank inflation for that. But the problem with falling behind on bills is that it can lead to unfavorable consequences.
And speaking of falling behind on bills, auto loan delinquency rates are on the rise. Car loans that were delinquent by more than 60 days increased by 5.3% in December compared to the previous month, according to Cox Automotive. Worse yet, delinquencies of this nature were up 26.7% compared to December 2021.
If you’re at risk of falling behind on your car payments, or if you’re already behind, it’s important to take control of that situation. Otherwise, the consequences could be very unpleasant.
The risk of not paying your auto loan
Any time you fall behind on a debt payment, whether it’s a mortgage loan, credit card, or personal loan, you run the risk of having your credit score take a serious hit. In fact, having a good credit score won’t help you in this regard, because sometimes, the higher your score to begin with, the more damage a single late payment can cause (even though that may seem counterintuitive).
Plus, if you fall far behind on your auto loan payments, you’ll risk having your car repossessed. That could put you in a really tough spot if you rely on your vehicle to get to work. In fact, it could leave you in a position where you lose your job completely.
What to do if you’re struggling with your auto loan payments
If you can’t keep up with your car loan payments, perhaps the worst thing you can do is ignore the problem and hope your lender will just forget about the money you owe. That’s not going to happen. So instead, be proactive. Reach out to your lender, explain your situation, and ask to negotiate the terms of your loan.
Your lender might agree to stretch out your repayment period so that your individual monthly payments shrink. That way, it’s still getting paid something and still making money on the interest portion of your loan. And if you’re able to go from, say, a $500 monthly auto loan payment to $250 a month, you might have an easier time keeping up.
Another option, of course, may be to sell your car and buy a much less expensive one in its place, resulting in a loan monthly car payment. And if you can sell your car and get by without one at all for a period of time, even better. That could allow you to boost your savings account balance so you’re less likely to land in a position where you fall behind on any sort of debt in the future.
These days, inflation is forcing a lot of people to skip bills or pay them late. So if you’re struggling with your car loan, that’s understandable. But do your very best to address the problem before it gets worse — and before you end up with extensive credit score damage and find your car getting dragged out of your driveway by a repo service.
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