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Over 44% of Americans have car loans, so many are familiar with making regular car payments. Missing a car payment can lead to serious financial and transportation issues. What actually happens if you miss a car payment?

Your car payment can be considered late just one day overdue

Some loan terms state that your payment is late if you don’t make it by the exact day it is due, regardless of the circumstances.

The lender might contact you

It’s in the lender’s best interest to keep your car loan in good standing. They might call or send a notice in the mail to encourage you to make your payment.

You might have to pay a late fee

While you might be late after one day, you won’t necessarily incur immediate fees. Most loan terms have a grace period within which you can make your payment with no additional costs. However, some terms enforce a relatively small late fee, like $25. Others are more. Check your loan terms to see fee amounts and when they could be incurred.

If you miss a full billing cycle, your car loan is considered delinquent

This is when things can get pretty bad, really fast. Some lenders will report your missed payment to credit bureaus at the 30-days-late mark. Others will wait up to 90 days. According to Experian, a delinquent loan hit can remain on your credit report for seven years.

Collections can lead to repossession and dismal credit

A person shown shoulders down sitting at table holding papers wearing grey suit black tie white toy car on table gavel on table
Daniel Tadevosyan via iStock

If you miss more than one payment, the lender could sell the loan to a collections agency. The agency will tirelessly seek out payment. Ultimately, they can apply for or sue for repossession. A repossession can put a dark mark on your credit report and make it difficult to secure any loans for years.

Everyone makes mistakes. The good news is that if you realize you missed a car payment a day or two after it’s due, you should be able to make the payment, perhaps pay a small late fee, and move on. The longer you wait, the worse the repercussions.

The key is to budget well, stay organized, and be aware of your loan’s terms.

Additional source: Gitnux