No matter how well you manage your money, you can't control unexpected expenses. When you find yourself owing more than the amount you have in your checking account, the option of deferring your car loan is a possible solution. However, before a lender will agree to defer your car loan, he may look at factors such as your past payment history, the reasons you need the deferral and your credit score.
Call the Lender, Fast
Call your lender as soon as you realize you won't be able to make your car loan payment. Explain that you're unable to make your car payment and ask about deferring your car loan. You may have a deferment agreement written into your loan – if so, draw your lender's attention to it. Some lenders offer a deferral up-front. However, you still need to request the use of the deferment.
Explain the Car Deferment Reasons
Be sure to offer the lender specific facts and details about your financial situation. A lender needs justification to grant you a deferral. For example, if you had an unexpected emergency expense due to the repair or replacement of a major appliance in your home, and it caused you to go over your budget, tell the lender.
Negotiate the Car Loan Deferment
The lender does not have to grant you a deferral, but most will if you are suffering from hardship circumstances. From the lender's perspective, it is much better to defer some payments until you are financially healthy than to have you default on the loan. Make sure you're clear about how long the deferral will last and when the next payment is due. Typically, you'll get a 30-day deferral and your payments will kick back in on the first day of the following month, depending on your payment schedule.
Watch Out for Hidden Charges and Credit Risks
Understand that you may have to pay fees as a result of the deferral. The actual amount can vary according to the lender's specific policies, and might include an administration fee, a late payment or a special deferment fee. Ask the lender for details. Another think to ask is whether your credit report will suffer as a result of the deferral. Lenders often report payment histories to the credit bureaus. If the lender tells you that it will report a positive payment history in connection with the deferral on your loan, ask for that promise in writing. Otherwise, the deferment may get reported as a negative event and your credit score will take a hit.
Keep a Record
In most cases, you should be able to organize the deferment over the telephone. It's good practice to write down all of the information – representative's name, phone number, extension, date and time of call, fees and deferral details – for future reference. While the lender may mail you a copy of the agreement to defer your car loan, it's helpful to have a record of the phone call and what you discussed. Finally, be aware that lenders often limit the number of times they will grant a deferral during the life of a car loan. Carefully weigh all of your financial options before choosing a deferral.
- Ask the lender if your credit report will suffer as a result of the deferral. Lenders report payment history to the credit bureaus. If the lender tells you that it will report a positive payment history in connection with the deferral on your loan, ask for that promise in writing, recommends the Consumers Union website.
- You may have a deferment agreement written into your loan. Some lenders offer this up-front. However, you still need to request the use of the deferment.
- Lenders often limit the number of times they will grant a deferral during the life of a car loan. Carefully weigh all of your financial options before choosing a deferral.
Based in Texas, Cynthia Measom has been writing various parenting, business and finance and education articles since 2011. Her articles have appeared on websites such as The Bump and Motley Fool. Measom received a Bachelor of Arts in English from the University of Texas at Austin.