Your when ready options when a payment is due
If a car payment is coming due and you do not have the money, contact your lender before the payment date — not after. Most lenders have options for people in this situation, but they only work if you reach out first. Waiting until you miss a payment damages your credit and closes off the easier routes.
Your lender's customer service number is on your loan paperwork or your monthly statement. When you call, be direct: tell them you cannot make the upcoming payment and ask what options exist. Do not make a promise you cannot keep. The goal is to understand what your lender will actually do, not to buy time.
Key Takeaways
- Contact your lender before a payment is due, not after, because options exist only if you reach out early.
- A deferment or forbearance delays one or more payments, but the skipped amount is added to the end of your loan and you pay interest on it.
- A loan modification changes the terms of your loan — usually extending the length to lower the monthly payment — and requires approval.
- If you cannot afford the car itself, selling it and paying off the loan (or walking away if you owe more than it is worth) may cost less than keeping it.
- Missing payments triggers a repossession process that varies by state but usually begins after two or three missed payments.
Deferment and forbearance: delaying payments temporarily
A deferment or forbearance allows you to skip one or more payments without when ready damaging your credit. The difference between them is small: deferment is usually offered by the lender as a formal program, while forbearance is a temporary agreement you negotiate. Both work the same way — you do not pay now, and the skipped amount gets added to the end of your loan.
This matters because you are not erasing the debt. If you defer one $400 payment, you still owe that $400 plus interest on it. Your loan gets longer, and you pay more total interest over time. But if you are in a temporary crisis — a job loss you expect to recover from, a medical emergency that is passing — deferment buys you time without the when ready damage of a missed payment.
Ask your lender specifically: how many payments can be deferred, how long does the process take, and what happens to your credit report. Some lenders report deferred payments as on-time; others report them as deferred. The answer changes what this option costs you.
Loan modification: changing the terms to lower your payment
A loan modification is a permanent change to your loan. The most common modification extends the length of the loan — if you have five years left, it might become seven years. A longer loan means a smaller monthly payment, but you pay more interest overall because you are borrowing for longer.
Loan modifications require your lender's approval and usually take several weeks. You will need to show that you have income (even if reduced) and that the new payment is something you can actually afford. If your income has dropped permanently or you have no income, a modification may not be possible.
Ask your lender whether they offer modifications and what documents they need. Some lenders have formal programs; others handle them case by case. The answer tells you whether this is a real option for your situation.
Selling the car: understanding what you owe
If the car itself is the problem — you bought more car than you can afford — selling it may be the cheapest way out. But you can only sell a car you own outright. If the lender holds the title (which is true for almost all financed cars), you cannot sell without paying off the loan first.
Find out what your car is worth by checking sites like Kelley Blue Book or NADA Guides, which show what dealers and private buyers typically pay. Then find out what you still owe on the loan by calling your lender or checking your statement. If the car is worth more than you owe, you can sell it, pay off the loan, and keep any money left over. If you owe more than the car is worth, you have a negative equity or underwater loan — you would have to pay the difference out of pocket to sell.
Selling a car you are underwater on is still sometimes cheaper than keeping it, especially if you cannot afford the payment. The cost of selling (auction fees, dealer commissions, or private sale hassle) plus the payoff difference might be less than months of payments you cannot make plus the damage to your credit from missing them.
Walking away: what happens if you stop paying
If you stop making payments, your lender will eventually repossess the car. The timeline varies by state and lender, but repossession usually begins after two or three missed payments. Once the car is repossessed, the lender sells it at auction, and you are responsible for the difference between what it sells for and what you owe — called a deficiency.
A repossession stays on your credit report for seven years and makes it much harder to borrow money in the future. You may also face a lawsuit for the deficiency, which can result in wage garnishment or a bank account levy. Repossession is not a clean exit; it is a cascade of financial damage.
If you are considering walking away, understand the full cost first. Talk to a credit counselor (many nonprofits offer free counseling) or a lawyer who handles consumer debt in your state. They can tell you what repossession actually means in your situation and whether there are better options you have not considered.
Credit damage and what it means for you
A missed car payment shows up on your credit report within 30 days and damages your credit score when ready. The damage is worse the later you are — 30 days late is bad, 60 days is worse, 90 days is much worse. A repossession is the worst outcome for your credit.
A lower credit score makes it harder and more expensive to borrow money in the future. You may pay higher interest rates on credit cards, car loans, or mortgages. Some employers and landlords also check credit scores, so damage can affect housing and jobs. This is why contacting your lender early matters — deferment or forbearance usually does not damage your credit the way a missed payment does.
Finding help: nonprofits and counseling services
If you are struggling with a car payment, a nonprofit credit counselor can help you understand your options without pressure to buy anything. The National Foundation for Credit Counseling (NFCC) and the Financial Counseling Association (FCA) both have counselors who work with people in your situation. Many offer free or low-cost consultations by phone.
A counselor can help you decide whether deferment, modification, or selling makes sense for your specific situation. They can also help you build a budget so you understand whether you can afford the car at all, or whether a different vehicle would be more realistic. This is especially useful if you are not sure whether your income problem is temporary or permanent.
Frequently Asked Questions
What happens if I miss one payment?
One missed payment damages your credit score and usually triggers contact from your lender. After 30 days, it appears on your credit report. Most lenders do not repossess after one missed payment, but they will charge a late fee and may increase your interest rate. Contact your lender when ready to discuss deferment or forbearance.
Can I refinance my car loan if I cannot afford the payment?
Refinancing means taking out a new loan to pay off the old one, usually at a lower interest rate or longer term. Most lenders will not refinance if you are behind on payments or have recently missed one. If you are current on your loan, refinancing may lower your payment, but you will need decent credit and income to may have access to.
What if my lender will not work with me?
Some lenders are more flexible than others. If your lender refuses deferment or modification, selling the car or consulting a lawyer about your state's repossession laws are your next steps. A credit counselor can also help you understand whether your lender is following state law or whether you have other protections.
Does deferment hurt my credit score?
Deferment usually does not damage your credit the way a missed payment does, but it depends on how your lender reports it. Some report deferred payments as on-time; others report them as deferred. Ask your lender specifically before you agree to deferment so you know what to expect.
How much will repossession cost me?
Repossession costs vary widely. You may owe the lender's repossession fees (often $300 to $500), storage fees while the car is held, auction fees, and the difference between what the car sells for and what you owe. You could end up owing thousands of dollars even after the car is gone. This is why avoiding repossession is worth the effort.