In the current economic scenario, where the economies around the world are facing problems of high inflation, unemployment and bleak job opportunities in the market, loan repayment is hitting hard on the pockets of many people. People who once had good credit and made the loan repayment on time are now under constant fear of defaulting on their loans.
For, every person who has a loan to be paid, probably the major part of his monthly budget is set aside for repayment of the loan. And one would not want to default on their loan for obvious reasons. The first and most important reason is that, it will destroy the credit history and secondly, one might lose their loaned possession.
Let us specifically discuss the affects of car loan default. Let's look into some of the important points that can cause car loan default.
When is a person considered a defaulter?
Technically, a car loan default happens when a customer repeatedly fails to make the agreed car loan payments to the bank that loaned the purchase of the car. Usually, the car loan agreement that an individual signs with their bank will have these terms and conditions clearly mentioned in the agreement. Details about the car loan, loan repayment obligations and the possible reasons for defaulting on car loan are usually explained in the agreement. The agreement will also provide the risks involved and the possible solutions in case of a default.
Though the term ‘default' has no universal definition to it and differs from case to case, the general meaning of ‘default' is if an individual is 30, 60 or 90 days late on making one or more payments. It is very important to know what one should do when one realizes the fact that they might not be able to make the car loan repayment for the month and avoid being tagged as a customer at ‘default.'
How to wade out of the trouble?
The problem pops up when the borrower realizes that they are unable to pay back their car loan. Borrowers should call up their lender/bank to cite and explain the reason honestly for the delay in payment. The lender might have heard the excuse thousand times before but being straightforward could work in the customer's favor and this could then eventually bring about a mutual adjustment that would prove beneficial for both the parties.
Apart from this, there are many other options available to a car loan borrower.
Borrowers can try to talk and convince the lender/bank to extend the car loan duration. For instance, if one had originally taken a car loan for 36 months, one could request it to be extended to 48 months. This will ensure that the monthly commitment to pay the EMI is reduced.
Borrowers can also ask the lender/Bank to allow making a deferred payment. It means that borrowers would be allowed to skip the current month's payment and make it at a later date. The borrower can explain the lender that giving them a month's time for the repayment can give them some flexibility to pay.
Along with it, borrower can also convince the lender/bank to change the payment due date permanently.
Late charges are often levied on late payments. If the borrower feels that these accumulated late charges is actually straining them from making a prompt payment, they can always ask their lender/bank to waive off these fees. If it would help the borrower to make a timely payment, the lender/bank might agree to waive off the late fees.