When you’re trying to buy a car, it’s easy to get caught up in the excitement of the moment. But when it comes down to financing your vehicle, you should know what happens if you default on a car loan.
Consequences of Defaulting a Car Loan
If you default on a car loan, it can be a serious matter. The lender can pursue legal action to get its money back. Here are other consequences of defaulting on a car loan.
Your Credit Will Drop
If a creditor repossesses your vehicle, they will report it to Equifax Canada for inclusion on your credit report. A repossession will remain on your credit report for six years from the date of default. In the meantime, work on your credit score and try going for bad credit car loans Alberta.
Your Car Will Be Repossessed
If you don’t make regular payments on your car loan, your lender may repossess the vehicle and sell it to recover their lost funds. This means that even though you still owe money on the car, someone else will own it and drive it around town.
You Could Be Sued for Breach of Contract
If you fail to make your payments, the lender can sue you for breach of contract. If they win, they may be able to take your car away and sell it to recover the money you owe them.
How To Prevent a Default on a Car Loan
If you’re having trouble making payments on your car loan, you can do several things to prevent a default.
Negotiate With the Lender
If you default on a car loan, it is possible to negotiate with the lender and work out a repayment plan that suits you. Contact your lender and ask them what options are available.
Consolidate Your Debt
If you have more than one loan, try consolidating them into one payment and one interest rate. This will help reduce your monthly obligations and make it easier for you to manage your finances.
Refinance Your Car
If you’re having trouble making payments, consider refinancing with another lender. This can help lower monthly payments or interest rates, which will reduce the amount of money you pay each month.
Talk to Your Lender About Deferment Options
If you’re going through financial difficulty, ask about deferment options for temporarily stopping your payments. You may negotiate with the bad credit car dealers to pay off the balance over time without making additional payments during this period.
So, What Happens if You Default on a Car Loan?
If you default on a car loan in Calgary, you will have to deal with the consequences. Firstly, it can be hard to get another car loan. The credit bureaus will report this to the lenders, and they will not want to give you more credit.
This can make it difficult for you to buy another car or even rent an apartment. To avoid these consequences, always pay your bills on time. You want to keep your credit score high so that you can get credit when you need it.