Sara Routhier, Managing Editor of Features and Outreach, has professional experience as an educator, SEO specialist, and content marketer. She has over five years of experience in the insurance industry. As a researcher, data nerd, writer, and editor she strives to curate educational, enlightening articles that provide you with the must-know facts and best-kept secrets within the overwhelming worl...

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Joel Ohman is the CEO of a private equity-backed digital media company. He is a CERTIFIED FINANCIAL PLANNER™, author, angel investor, and serial entrepreneur who loves creating new things, whether books or businesses. He has also previously served as the founder and resident CFP® of a national insurance agency, Real Time Health Quotes. He also has an MBA from the University of South Florida. ...

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Reviewed by Joel Ohman
Founder, CFP®

UPDATED: Nov 7, 2011

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There are countless reasons why a borrower may miss a payment on a car loan: a lost job, a month where bills just seemed to culminate together, a medical emergency. The fact of the matter is it’s impossible to prepare for everything.

The good news is auto lenders understand this.

Most lenders realize that borrowers will encounter obstacles, and sometimes those obstacles lead to financial hardship. As a result, if this happens once, or on rare occasions few and far between, the repercussion is usually minor.

While any reported late or missed payment will result in a late fee and negatively affect an individual’s credit score, beyond a few reminder calls or letters, borrowers shouldn’t experience any major hiccup so long as they continue with their payments in a quick and acceptable time frame.

However, it is important to remember that missing a payment is in violation with most car loan contracts. When a contract is breached, the United States government does allow a lender several courses of action:

  • Lenders are permitted to repossess a vehicle without any advanced notice.
  • In the event a vehicle is repossessed, lenders can insist the borrowers pay the loan in full before giving back the vehicle.
  • A lender may sell a repossessed vehicle at auction.
  • There is a possibility the lender can sue the borrower for the difference between the price received for the vehicle in auction and the amount the borrower still owed on the car loan.

While those courses of action are permitted by law, keep in mind that lenders are people too. They understand life happens. In the case of a minor breach like a missed payment, repossession usually will not occur unless that breach becomes habitual.