In a perfect world, things would always go as they should.

Sometimes that is not the case.

If you have found yourself in a bind or about to fall behind on your payments. The best thing you can do is contact your credit card, mortgage, or auto loan companies and explain your situation.

To take action

If you have a car loan, you understand the importance of paying your loan on time. If you cannot make your payments on the exact due date.

You are given a 30-day grace period to make a payment without being reported late to the credit bureaus.

If you think you won’t be able to make a payment before the 30-day grace period ends, or anticipate being in a bind that will last longer than 30 days, there’s something you need to know.

Ignoring calls from your creditor is the wrong way to go.

*While you may feel embarrassed or reluctant to contact your creditor, you are not alone. Thousands of people fall behind on their payments due to financial hardship. The person on the other end of the phone is trained to handle these types of calls and will be more than willing to help you in any way possible.

What should you do?

Most auto loans have a provision that allows you to defer your payments for a short period of time while you get your finances in order. Options other than deferment may be offered, such as lower payments until you are able to make the full payment.

Your options will depend on your specific auto loan and the terms agreed upon at the time of sale.

If you are currently in good standing:

Call your lender and explain that you’ve had some setbacks and ask about your options for deferring your loan payment until you can make the payments. This will usually give you around 2 months to catch up.

If you are currently not in good standing (more than 30 days late):

Call your creditor back and explain that you’ve had some setbacks and would like to make a plan to catch up on your payments or defer a future payment. Ask about your options for deferring your loan payment until you are able to make a payment. You will generally be required to bring your account up to date at least 30 days before a deferment can be granted.

How will this help you?

Car repossession doesn’t end well for anyone. Not you and certainly not your creditor. Once a car is repossessed, it is usually sold at auction for a fraction of the cost. This is a situation in which everyone loses.

While your loan is in forbearance, the credit bureau will not be reported late because you have made an agreement with the company to pay at a later date.

The downside to this, of course, is that your loan agreement will be extended and you’ll end up paying more interest in the long run. This is, however, a better alternative to having your vehicle taken away.

When can your car be repossessed?

It all depends on the specific car loan you have. Generally, you are considered in default on your loan agreement as soon as you miss a payment.

That said, you are given a 30-day grace period. Some states allow cars to be repossessed after a late payment. The longer you delay in making your payment, the closer you are to having your car repossessed and your credit report taking a serious hit.

A repossession will stay on your credit for up to 7 years and hurt your chances of getting other auto loans in the near future. Even after a repossession, you may still owe the difference between what you owed your lender and the price your car sold for. This is called a deficiency balance. A deficiency balance is usually the norm, especially if you purchased a newer vehicle.

Please note that these options are for those experiencing temporary difficulties. It is not recommended for foreseeable long-term situations.