What Happens If You Default on Your Auto Loan?
Missing that auto loan payment feels like a punch to the gut, especially when you’re already stretched thin financially. Defaulting triggers a cascade of consequences that can impact your life for years, from immediate late fees to vehicle repossession and credit damage lasting seven years, but PA Auto Credit is here to help.
When Your Auto Loan Goes into Default
Your auto loan enters default when you miss payments according to your contract terms. Most lenders offer a 10 to 15-day grace period before charging late fees, but default typically begins after 30 to 90 days of missed payments. The timeline varies by lender, but some can legally repossess your vehicle after just one missed payment, though most wait until you’re 60 to 90 days behind.
Immediate Financial Consequences
Late fees hit first, ranging from three to five percent of your missed payment or flat fees between $25 to $50. These compound with each missed payment, turning a $300 car payment into a $400 obligation within months. Your lender reports delinquencies to credit bureaus after 30 days, creating negative marks that damage your credit score.
Long-Term Credit Damage
Payment history comprises 35 percent of your FICO Score, making an auto loan default particularly devastating for your credit. Late payments remain visible on your credit report for seven years, while repossession creates an even more severe mark lasting the same period. If your vehicle sells for less than you owe after repossession, you’re still responsible for the deficiency balance.