Missing a car loan repayment might seem like a minor hiccup, but it can have lasting consequences if not addressed promptly. Whether it was a simple oversight or a result of financial strain, it’s essential to understand what happens when you fall behind on your car loan and what steps you can take to minimise the damage.
In this article, we’ll explore what happens if you miss a car loan repayment in Australia, the possible short- and long-term impacts, and the options you have to get back on track.
Why Repayments Matter
Car loans are structured with fixed or variable repayment schedules, usually on a monthly or fortnightly basis. Each repayment includes both the interest and a portion of the loan principal. Missing a repayment disrupts this balance and can throw off your financial rhythm.
Loan providers rely on timely repayments as a sign of your creditworthiness. When you miss a repayment, even just once, it can trigger a series of events that impact your finances, credit score, and potentially your ability to keep the vehicle.
What Happens After a Missed Payment?
Immediate Late Fees
Most lenders charge a late fee if your repayment isn’t made on time. The exact amount depends on your loan agreement but can range from $20 to $50 or more. While this may not seem substantial, repeated late fees can quickly add up.
Lender Contact
Lenders usually reach out shortly after a missed repayment. Their goal isn’t to punish you but to understand what went wrong and to help find a solution. It’s crucial to respond to these communications. Ignoring them can lead to escalated consequences.
Arrears and Default
If the missed payment isn’t resolved quickly, your account may fall into arrears. Continued non-payment could lead the loan to be considered in default, usually after 30 to 60 days, depending on the lender.
Once your loan is in default, the lender may take more severe action, such as:
- Reporting your default to credit agencies
- Applying additional interest or penalty charges
- Repossessing the vehicle
Impact on Credit Score
Even one missed payment can impact your credit score. Most lenders report late payments that are 14 days overdue or more to credit reporting bodies. A lower credit score can affect your ability to secure future loans, get favourable interest rates, or even impact rental and employment opportunities.
Repossession of Your Vehicle
Repossession is usually a last resort, but it does happen. If the loan remains unpaid and you’re unresponsive, your lender may repossess your car to recover the owed amount. This process is legal but must follow specific procedures under Australian consumer credit laws.
Once the car is repossessed, it may be sold at auction. If the sale doesn’t cover the remaining loan balance, you could still be liable for the shortfall.
How to Get Back on Track
Communicate With Your Lender
The most important step you can take after missing a payment is to contact your lender. Most lenders are willing to work with borrowers experiencing temporary financial difficulties. You might be able to arrange:
- A revised repayment plan
- A short-term payment pause
- Waived or reduced late fees
Check for Hardship Assistance
Many lenders offer formal financial hardship programs. If you’re eligible, they may restructure the loan to make repayments more manageable or provide temporary relief. Documentation such as payslips, bank statements, or a budget may be required.
Make a Catch-Up Payment
If you can, pay the missed amount plus any fees as soon as possible. The sooner your loan is brought up to date, the less severe the consequences. This also prevents the account from falling into default.
Review Your Budget
Take this opportunity to reassess your monthly budget. Are there unnecessary expenses that can be cut? Can you allocate funds more efficiently? Creating a clear, updated budget can help prevent future missed payments.
Consider Refinancing
In some cases, refinancing your car loan might make sense. If you’re eligible for a lower interest rate or better terms, refinancing can reduce your repayment amounts and ease financial pressure. Be mindful of any refinancing costs or break fees before proceeding.
Preventing Future Missed Payments
Set Up Direct Debit or Reminders
Automating your repayments through direct debit or setting calendar reminders can help ensure you never forget a due date.
Create a Buffer Fund
Having a small savings buffer dedicated to loan repayments can be a lifesaver if unexpected expenses arise. Even $500 can provide peace of mind.
Monitor Your Accounts
Regularly check your loan and bank accounts to confirm repayments are being made and funds are available.
Don’t Let One Missed Payment Derail Your Finances
Missing a car loan repayment isn’t the end of the world, but it’s not something to ignore either. Acting quickly can prevent minor setbacks from becoming major financial issues. Whether it’s a one-off mistake or the sign of deeper money troubles, reaching out for support and reviewing your options is the best path forward.
Car loans are a long-term commitment, and occasional hiccups are part of the journey. The key is to stay informed, be proactive, and take control of your financial future.
FAQs
What should I do immediately after missing a car loan repayment? Contact your lender as soon as possible. They can offer solutions to help you catch up and avoid default or repossession.
Will one missed payment hurt my credit score? If the payment is more than 14 days late, it may be reported to credit agencies and impact your score. The quicker you resolve it, the less damage it may cause.
Can I lose my car after one missed payment? Repossession usually doesn’t happen after a single missed payment, but if you continue to miss repayments and avoid contact with your lender, repossession is a risk.
Can I get hardship support from my lender? Yes, many lenders offer hardship assistance for borrowers experiencing temporary financial challenges. You may need to provide supporting documents.
Should I consider refinancing after a missed payment? If your current loan is unaffordable and you qualify for better terms, refinancing could help. However, it’s important to weigh the costs and consult a financial expert.
If you need expert advice, don’t hesitate to reach out to us. We’re here to guide you through every step. Contact Us and take charge of your financial future today!
✉️ info@wealthyyou.com.au
☎️ (02) 7900 3288
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