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Home / Tips and Tricks / What time can you wait for your car payment? What to do if you cannot pay your bills

What time can you wait for your car payment? What to do if you cannot pay your bills


As more and more people experience financial uncertainty as a result of the coronavirus pandemic, banks and other lenders offer programs to postpone car payments.

Angela Lang / CNET

If you've already missed one or two car loan payments because of the coronavirus – or you think you'll be missing a car payment soon – you're not alone. According to the Wall Street Journal, 7.5% of car loans are currently not payable. That translates to millions of drivers across the country.

Usually missing a car payment misses your credit score or can even lead to the bank taking your car back. In an effort to help clients get through the current financial situation, most lenders seem sympathetic, but beware, the worst thing you can do is ignore the problem and assume it will resolve itself. (Scroll to the end for what you absolutely should not do .)

In addition to funding like the first round of stimulus checks that are still being sent, as well as a Possible second round of checks currently under discussion, most car loan lenders have implemented financial hardship programs to help borrowers who have problems paying due to the pandemic. But just like the available help with rent payments and unemployment benefits you need to know where and how to apply.

Here is a summary of the most recent information and resources we can find to help you pay for your car. We will continue to update this story as new details emerge.

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How does the coronavirus affect late car payments?

Normally, most lenders report late payments to the credit bureaus once it is at least 30 days late, and they usually come to collect your vehicle after you have missed three or more payments in a row.

Now the situation has changed. In response to the pandemic, some states have proposed legislation to limit or delay the seizure of vehicles, although other areas have no such measures on the table. For example, in New York, the state meeting is debating a bill that would shut down all car loan payments for 90 days. In April California ordered auto insurance companies to repay two months of customer premiums .

The auto seizure industry itself has not agreed whether repo companies, many of whom are now laying off dozens, may even operate in areas under strict shelter-in-place orders . The Association of Credit and Collection Professionals, a lobbying group for debt collection agencies, has argued that debt collection is an essential service, but legislators have yet to address it. As more US cities begin to reopen and orders formwork non-essential companies are gradually lifted it is only a matter of time before debt collection companies get back to business.

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James Martin / CNET

However, these measures represent at best a delay of execution. Ultimately, you will have to face the problem. If you're concerned about not getting your car loan back, the best protection against the loss of your car or truck may be from your lender yourself.

Chances are your lender is willing to help

In response to the widespread financial turmoil caused by the corona virus pandemic, many lenders have broadened and streamlined their deferral of financial troubles. With these programs, you can usually skip your car payment for the next one to three months, so you can get your money back in order. After the deferral period ends, your monthly payment will either be slightly increased or your loan will be extended for the same period as the deferral.

On the other hand, interest will continue to rise during the months that you skip your payment, so you will pay more for your vehicle in the long run. But on the plus side, your missed payments will not show up as negative numbers on your credit report .

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Hyundai is one of many auto manufacturers offering deferral for current loans and new car purchase.

Juan Garzon / CNET

CreditKarma, a consumer credit monitoring company, has a list of banks with information about their hardship programs, and its car buying guide, Edmunds, keeps up with what automakers offer to people with loans through the manufacturer.

CNET sister site Roadshow describes tools for existing loans and incentive programs for new cars from a number of car manufacturers. If you don't see your lender on any of those lists, contact the company directly through its website or app.

How to Talk to Your Bank About Options

If you have no idea where to start, the legal services website DoNotPay has a chatbot that can help you to prepare a letter your lender. However, with so many people losing income as a result of the pandemic, most banks have made it easier than usual to apply for deferment, so you can probably handle this yourself.

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You may or may not be asked to provide documentation that you have lost income due to the coronavirus, so if you have a termination letter or a letter of resignation, be prepared to send your bank a copy of those documents.

Otherwise, just be honest and candid about your situation and realistic about how much time you need to get back on your feet. Generally, banks would rather work with you and keep you as a customer than leave you without a car.

What Happens When You Miss a Car Payment

In most states, a lender, such as your bank, can initiate the repossession process the day after you miss even one payment, but most companies give their customers a grace period. Often times, the lender will not even charge late fees until payment is at least 10 days late, and most will only report it to the three major credit bureaus if it is more than 30 days late is.

If you are more than 30 days past due – and especially if you also miss the next two payments in your borrowing cycle – then you start entering repossession or repo territory.

Most repos take place after two or three months with no payments

If you are behind your car payment for 90 days or more (or think you are behind due to this), you may very well be at risk that your car is taken back. Your lender can be more flexible if you've never missed a payment, but the more times you've been late in the past, the sooner they can try to take it back.

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Ford currently offers to pay six months of new vehicle payments when you buy a new car from the company.

Wayne Cunningham / CNET

How Seizure Works

In most cases, your lender will contract with an external agency specializing in repossession. That company uses all the information it can get – for example, your home and work addresses – to track down the vehicle and tow it to a secure, usually closed, property. It does not need your car keys to take your car with you.

The repo company then charges your bank for towing the vehicle and a daily storage fee. Unless you happen to leave your keys in the car, the repo company will also hire a locksmith to make a new set of keys – and then charge your bank for that service, too. When all is said and done, you owe anywhere from a few hundred to over a thousand dollars in fees, which the bank then expects to pay you, regardless of whether you take your car out of the repo or not.

Your Rights vs Bank Rights

In almost all cases, your bank does not need a court order to try to take your car back. You can see a list here of the specific laws for taking back cars in each state, but generally your lending institution (or a company that hires it) has the right to enter your property and the car take as long as no one commits a "violation" of peace. "(Wait for it ….)

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If you stop paying your car payment, a car repair service will eventually tow your car.

Andrew Hoyle / CNET

This means that its representatives cannot break into a locked garage, through a locked gate, or otherwise use physical force against you or your property to take possession of your vehicle. However, they can follow you to work – or to the supermarket – and wait until you leave your car alone.

How To Get Your Car Out Of The Warehouse – And What Happens If You Don't

But What If It's Too Late And Your Car Has Been Repaired? Many states have laws in place about how long and under what conditions lenders should give you a chance to get your vehicle back from repossession, but the conditions are not exactly favorable if you are in some sort of financial situation that has led to repo in the first place.

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Generally, the law requires lenders to return your car to you only when you pay off the loan, as well as any towing and storage costs that may have arisen. In practice, however, most lenders are willing to give you your car back if you can at least catch up on your overdue payments (and of course the repo bill too).

If you leave your car in repo because you can't afford to take it out or you just decide it's not worth it, you're still not completely off the hook. The bank will likely auction your car to the highest bidder and then apply the proceeds from that sale to your remaining balance, including take-back costs. If that doesn't cover your entire debt, the bank can continue to chase you for the rest, including handing over your account to a collection agency and reporting the overdue receivables to the credit bureaus.

You also have a few wildcard options.

If you risk taking your car or truck again, other options are available besides procrastination, but none are as simple or convenient. You can use a so-called & # 39; voluntary take back & # 39; contacting your lender and indicating that you want to transfer your vehicle to it. Your credit will be a hit and you will be liable for all outstanding debts that the bank does not recoup from an auction, but the overall impact on both your credit score and your wallet will be less than if you wait for the bank to forcibly repay your car .

You Can Refinance Your Car for a Longer Loan Period with a Lower Monthly Payment, but That Works only if you have already repaid a significant amount of the principal. If you've only had your car loan for a year or two, you may still owe more than it's worth. Your credit must also be sufficient to offer a bank a new loan for you, which may or may not be the case.

You can also try selling or trading your car on the open market for something a little less expensive, but again, now that the economy is going through the strongest economic downturn it has seen in over a decade neither of these options is very attractive.

What you absolutely should not do

Whatever you do, try not to hide your car from your bank or the repo company. First, you probably won't beat them in their own game, and the longer it takes (and the harder you make it), the more they will eventually charge you for their services.

And don't just stop paying your loan and hope for the best. Whether legislators decide that the repo industry fulfills an "essential" function, or that the repoman has to wait for a treatment or vaccine like the rest of us before going back to work, eventually your delinquency will catch up with you. With banks that currently show some compassion for those who have experienced financial difficulties, you can take advantage of any of their tools as much as you can.

If you are concerned about being able to pay your car payment and you have not yet received your stimulus check, you can track your stimulus payment as follows to see when you can expect the money. Once you have received your check, these tips can show you how to spend your promotional money wisely . If you are concerned about housing, here is what to do if you cannot afford your rent as well as everything you need to know about mortgages during the pandemic.

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