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Understanding Auto Loan Delinquency: Consequences, Defaults, and Solutions

Learn about the impact of auto loan delinquency on your credit score, the consequences of default, and the steps to take when facing difficulty in making car payments. Discover proactive solutions to avoid adverse effects on your financial future.

Questions Answered in this Article

Question 1: What is auto loan delinquency? Answer: Auto loan delinquency occurs when you fail to make your car payment within a specific time frame after the monthly due date, usually 30 days.

Question 2: What are the consequences of being delinquent on a car loan? Answer: Being late on a car loan can result in contact with your lender’s collections department and negatively impact your credit score. It can also affect your ability to obtain future loans and secure lower interest rates.

Question 3: Is auto loan delinquency the same as auto loan default? Answer: No, auto loan delinquency and auto loan default are different. Negligence refers to late payments, while default occurs when your lender believes you won’t make any payment. The default can lead to repossession of your vehicle and long-term damage to your credit.

Question 4: What steps can I take when I can’t make my car payment? Answer: It’s best to contact your lender before the payment is late and explain your situation. They may have resources, such as hardship programs, to help you. Taking proactive measures and communicating early can increase the chances of finding a solution.

Question 5: How can auto loan delinquency impact my credit score? Answer: Auto loan delinquency can lower your credit score when the late payment is reported to credit bureaus. This can make it harder to obtain future credit and may result in higher interest rates. Severe delinquencies or defaults have an even more significant negative impact on creditworthiness.

Auto Loan Delinquency: What It Is and How to Avoid It

Auto loan delinquency refers to the failure to make a car payment within a specific timeframe following the monthly due date, typically 30 days. This is the point at which most lenders consider a payment delinquent and report it to the credit bureaus. However, many lenders offer a grace period of around 10-15 days, during which you can pay without incurring late fees. Although the payment is considered late during this period, it is usually not reported to the credit bureaus unless it reaches the 30-day mark. Refer to your loan agreement to find out about your lender’s grace period and late fees.

If you find it challenging to make a car payment, contacting your lender before the 30-day mark is advisable. In many cases, lenders are willing to work with you to help you avoid the negative consequences of having a delinquent auto loan.

More: Auto Equity Loans: How They Work and What You Need to Know

Consequences of Auto Loan Delinquency

Failure to make prior arrangements with your lender and not making your car payment can result in contact with your lender’s collections department. This notification may occur via phone or mail, depending on the lender and the duration of your late payment.

At around 30 days late, or shortly thereafter, your past-due payment will be reported to the major credit bureaus—Experian, TransUnion, and Equifax. Having a delinquent payment written is likely to lower your credit score and can impact your ability to secure future loans and obtain lower interest rates.

Most lenders consider auto loans significantly delinquent when they reach 60 days late, hindering your credit qualifying chances.

Is Auto Loan Delinquency the Same as Auto Loan Default?

Auto loan delinquency and default are not defined in the same manner. Auto loan delinquency refers to the lateness of your car payment, while auto loan default occurs when your lender believes you will not make any payment. Typically, auto loan default is declared after 90 days without making any payments.

When your lender considers your loan in default, they may initiate the repossession process for your vehicle. Subsequently, the lender will sell the repossessed car. If the selling price exceeds your outstanding loan balance, you will be responsible for paying the remaining amount and additional fees. Additionally, a repossession will remain on your credit report for seven years, resulting in long-term damage to your credit.

More: Everything You Need To Know About Auto Loan

What to Do When You Can’t Make Your Car Payment

When facing a potential late car payment, the best action is to address the issue before it becomes overdue.

Start by informing your lender about your difficulty in making the payment on time. Provide them with relevant details, such as job loss or a medical emergency that may have contributed to the financial hardship. Your lender might have resources like a hardship program to assist you. Additionally, they may be more inclined to adjust your loan terms if you proactively communicate with them early rather than waiting until you are already delinquent or in default.

Learn More: Auto Loan Refinancing: Everything You Need to Know


  • Auto loan delinquency occurs when car payments are not made within the specified timeframe, usually 30 days after the due date.
  • Many lenders offer a grace period of 10-15 days to make payments without incurring late fees.
  • Delinquent payments are typically reported to credit bureaus at the 30-day mark, potentially lowering credit scores and affecting future loan eligibility.
  • Severe delinquencies (60+ days late) can significantly impact creditworthiness and make it harder to qualify for credit.
  • Auto loan delinquency differs from auto loan default, which occurs when the lender believes you won’t make any payment, typically after 90 days.
  • The default can lead to repossession of the vehicle and long-term damage to credit.
  • It’s essential to contact the lender before the 30-day mark if facing difficulties paying.
  • Lenders may have hardship programs or be willing to adjust loan terms if approached proactively.
  • Communication and early action can help avoid the negative consequences of delinquency or default.
  • Auto loan delinquency can have lasting effects on creditworthiness and future financial opportunities.

Definition of Terms

  1. Auto Loan Delinquency: Refers to the failure to make car payments within the specified timeframe after the monthly due date, typically 30 days.
  2. Grace Period: A set period, usually 10-15 days, during which a borrower can pay after the due date without incurring late fees.
  3. Credit Bureaus: Organizations that collect and maintain credit information on individuals, such as Experian, TransUnion, and Equifax. They provide credit reports and scores to lenders to assess an individual’s creditworthiness.
  4. Credit Score: A numerical representation of an individual’s creditworthiness based on their credit history. Lenders use it to determine the risk of lending money to a borrower.
  5. Severe Delinquency: Refers to auto loans that are significantly past due, typically at least 60 days late. Severe delinquencies can substantially impact credit scores and future loan eligibility.
  6. Auto Loan Default occurs when a borrower fails to make any payments on their auto loan for a specific period, typically after 90 days. It can lead to repossession of the vehicle and long-term damage to credit.
  7. Repossession: The process by which a lender takes possession of a vehicle when a borrower defaults on their loan. The lender may sell the repossessed car to recover the outstanding loan balance.
  8. Hardship Program: Programs offered by lenders to assist borrowers facing financial difficulties. These programs may provide temporary relief, such as adjusted payment terms or deferred payments, to help borrowers during challenging times.
  9. Credit Report: A detailed record of an individual’s credit history, including information about loans, credit cards, payment history, and any delinquencies or defaults. Lenders use credit reports to evaluate creditworthiness.
  10. Creditworthiness: The measure of an individual’s ability to repay borrowed money based on their credit history, income, and other financial factors. Lenders assess creditworthiness to determine the risk of lending money to a borrower.
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