What happens when you default on a car loan?

My budget is incredibly tight this month. I have to prioritize which bills and expenses I can afford. My car loan is one of the most expensive costs I have each month, but what happens when you default on a car loan?

Answer
I’m sorry to hear about your financial situation. You should try your hardest to keep up to date on your car loan payments.
When you default on a car loan, the lender could repossess your vehicle and your credit score will be negatively affected. Fortunately, most lenders will work with you to figure out a solution rather than repossess the vehicle. That said, any late payments or delinquency will stay on your credit report for seven years.
If you’re struggling to make your monthly payments, contact your lender immediately and before you miss a payment if possible. Reaching out to find a solution before defaulting shows you’re working in good faith. The lender may be more understanding and willing to help.
Additionally, if you constantly struggle to make your monthly payment, you should consider refinancing your loan. When you refinance, you sign a new loan agreement with updated terms that make repayment more manageable.
On average, car owners pay $85 less every month by refinancing their auto loans. See if refinancing will save you money with the Jerry app.
Jack Walsh
Answered on Dec 08, 2021
Jack is an insurance specialist and writer living in Buffalo, New York. He has a BA from Union College and worked as an insurance agent with Jerry before joining our content team. He enjoys using data and research to break down complex subjects and convey a story. In his spare time, Jack enjoys cycling, cooking, and exploring Buffalo’s beautiful waterfront.
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