Girl in car with credit car

Can I extend or delay payments for my car loan?

A car for many people isn’t just a luxury, but a necessity. If you don’t live in an area with efficient or accessible transport links, it might be your only way to complete daily errands, or get to work and, ultimately, make money. So, it can be worrying when you find yourself running into financial trouble.

Just like any other type of loan, it is vital that you make your auto loan payments on time and maintain a good relationship with your lender. If you sense that you are heading into the red, the best thing to do it honestly communicate with your lender, and scope out what options are available to you.

What happens if I can’t make my loan repayment?

Everyone who takes out a car loan will have negotiated a repayment schedule with their lender that they think will work for both parties, however sometimes financial problems arise that can’t be predicted and this can throw your repayment plan off course.

In the worst case, you may end up faced with a involuntary repossession, this is when you break the terms and conditions you initially agreed upon when you took out your loan, and your lender forcibly takes your car. They are well within their rights to do this, and will negatively impact both your credit score, and your ability to take out a loan in the future. You might also end up landed with storage and towing fees incurred as part of the repossession process.

Alternatively, if you suspect you may run into danger soon, you can offer to have your car voluntarily repossessed. This will save on the traumatic experience of waking up to the bailiffs knocking on your door, but will still reflect badly on your credit score.

The best thing to do, however, is catch yourself before you run into any hot water, and explore ways to avoid repossession and the possible destruction of your credit and lending profile.

Can you afford to pay any amount of money?

The best thing to do is to assess your situation before you make any rash decisions. Can you afford to pay back even 20% of your monthly repayment? How long will it be before you have the money to make the adequate repayment? Try and figure out if your situation is a long-term one, or if this is just a minor financial blip. Any additional expenses outside of living ones should not amount for than 20% of your income per month. This should also include any other debt repayments.

Start to do a little research; it is important that you fully understand the details of your pre-agreed loan repayment plan. Check through any paperwork you have and make sure you are aware of your loan balance, interest rate and term, as well as whether there is a fee charged for a missed or late payment.

Discover your options

Different lenders will have different options available for their customers. Be honest with your lender, have a chat and see what they can offer you.

Defer the payment

The first option would be to defer the payment. Your lender will have their own deferment policy, whether than means adding the due payment to the end of the policy, having you pay a portion of interest that is lower than the full payment, or seeing your interest rate rise. The best thing to do is anticipate the late payment before it is due, and that way you have enough time to schedule your deferred payment. You should be aware, however, that most lenders put a limit on how many times a customer can defer their payment.

Change the length of the repayment

If the first option isn’t feasible for you, then your next best bet is to change the term time of your loan. If your lender is onboard, they may allow you to push back the due date another few weeks, giving you some extra time to come up with the funds.

Consider refinancing the loan

Finally, some lenders will allow you to refinance your car in a way that extends the term of the loan, while reducing the payment. You will probably end up paying more in the long run, but it does mean no nasty run-ins with a bailiff.