How do I defer a car loan?
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UPDATED: Nov 15, 2012
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There are a few steps that borrowers must follow in order to defer payments on their car loans.
Deferments allow borrowers to hold off on payments for a temporary period of time without facing penalties such as costly fees. Car loan deferments can be especially useful for borrowers that need to prioritize their money for another payment.
Lenders are accustomed to receiving calls and inquiries about deferment options in light of the financial challenges that many Americans face. News concerning car loans already mentions how pressured cash-strapped borrowers feel, so it is not uncommon for lenders to be asked about deferment options amid the difficult economy.
First, borrowers should contact their lender. Car loan lenders are a diverse bunch ranging from auto dealership financers to banks and credit unions. As a result, they will each have different deferment qualifications. Some may even require proof that the borrower is in a desperate financial situation, which warrants the need to defer payment. Many lenders stipulate that borrowers must have made a set number of payments already—in effect proving with past payments that the borrower is earnestly trying to repay their debt.
Borrowers need to explain their financial situation to their lender. This can be a sensitive subject for some, but being upfront and truthful with a lender can help prove how necessary a deferment is to a borrower’s financial stability. While lending is a business, lenders are people too.
Additionally, they want the most money they can get. If that means waiting a few months while a borrow finds his or her footing again, many will be more than accommodating.
If borrowers are approved for a deferment then they must sign and complete the necessary forms. Making a mistake at this point of the process could cause a delay in the deferment approval, or, worse, it could result in rejection.
Keep in mind, a processing fee is sometimes required. Many lenders will check the credit score of a deferment applicant just to make sure the applicant truly is in dire financial straits.
Once borrowers are approved for their deferment, they must do all in their power to use this time wisely and prepare themselves for the eventual return of a regular payment schedule.
If a deferment period does not help a borrower very much, then speaking with a lender about lowering monthly payments should be pursued. Defaulting after a deferment will likely prompt a car loan lender to repossess the vehicle.