Effects of failure to pay an auto loan

Failure to pay the payments involved in an auto loan would probably create significant repercussions on your credit report. However, there are still a number of less serious outcomes in case you fail to make the loan payments. Lenders are businessmen so they don’t usually resort to harsh actions. To provide you with greater understanding of the possible effects of being unable to provide the payments of car loan, this article enumerates the outcomes according to the nature of delays.

Preliminary missed payment

In case you failed to pay the loan premiums for the first time, most lenders would not treat this as a serious offense. Most of the time, they would consider this as late fee. They would usually call your attention and remind you that you were not able to provide the payment. In most cases, lenders would try to work with you and determine the date when you would pay for the missed payment.

Payment delayed for 30 days

In the event that you were not able to pay the loan premiums for almost a month, lenders would treat this as a serious offense. They would probably report this to credit reporting agencies such as Experian, TransUnion, and Equifax. This report would eventually be included on your credit report and reduce your credit score. However, you still have the car in your possession and all you have to do is pay for the payment due as well as the penalties attached to it.

Payment default

You enter into the so called “default period” in case you failed to pay the loan premiums for 90 days. Due to this, lenders would send you an official Notice of Default. This notice simply signifies that you were not able to meet the terms indicated on the loan agreement. In addition to this, the Notice of Default might give the terms as to how you would rectify the loan standing that you have such as requiring you to pay for the late amounts and the charges for not being able to pay on time. The issuance of the Notice of Default also means that the lending company are going to start the repossession of the vehicle and other civil suits that would allow them to collect what you owe.


Repossession usually happens when you ignore the Notice of Default and when you failed to provide the payments due. Lenders would send an agent that would handle the repossession process. These agents most of the time would bring along police officers to ensure their safety and the possession process. However, there are also repossession agents that would just tow the car away.


Renegotiation allows you to redeem the vehicle by paying the amounts you failed to pay together with the late payment and repossession charges. Renegotiation is your last chance of settling the amount you owe from lenders.

Resort to legal action

Lenders usually resort to legal action when are not able to meet the payment terms provided by the lender after your car is sold. In this particular situation, the lender would sue you for not paying the amount you owe from the lending company. In case you lose the suit, you are required to pay the amount you owe, the penalties involved, and the expenses spent by the lender in seeking legal action.

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