If you find yourself falling behind on your monthly car payments, an auto loan deferment from your lender can really help. But, especially if you have bad credit, just be sure you understand what doing this will cost you.

Bad credit and auto loan deferment

Here's the story line:

You had problems with you credit but you needed a car to get work. Rather than paying cash for a clunker, you decided to finance a newer and better used car with low miles with a subprime auto loan. The car payment was well within your budget – even with insurance – and you were smart enough to also purchase an extended warranty that covered the entire 48-month loan term. In other words, you tried to cover all the bases to make sure you'd never miss a monthly payment.

So far, you've done all the right things.auto loan deferment

But then something unexpected happens (a temporary layoff, medical expenses, family emergency, etc.) and you could see where you might start falling behind on your car payments. Still, you were smart and contacted your lender BEFORE you started missing payments and explained your situation.

Since your past payments had always been on time, your lender was willing to help you out and offered to arrange a loan deferment, explaining that you could skip your next two payments and that these payments would be added to the end of the loan.

That sounds simple enough, but in addition to the positive things that happen – such as giving you time to catch up - there are drawbacks to doing this.

Auto loan deferment pros and cons

First the good news:

  • You avoid incurring late fees.
  • You could avoid the possibility of repossession.
  • If you have equity, this might give you time to sell the car.
  • This might also give you enough time to refinance the car.

Now the bad news:

  • The payments that you skip don't go away but are added to the end of the loan.
  • Depending on the lender, you still may have to make your monthly interest payments on the loan.
  • Even if the lender doesn't require that you make interest payments, interest will still grow during the deferment, which means you'll be paying more in interest charges over the life of the loan.
  • Most lenders will limit the number of times (per year or over the life of the loan) that payments can be deferred.

One other thing to keep in mind: Every lender has a different loan deferment and many require you to be current on the loan in order to take advantage of this type of program.

The Bottom Line

If you think there might be a chance that you'll fall behind on your auto loan payments, contact your lender immediately, explain your situation, then see what programs the lender has – including auto loan deferment - that might help you.

One more tip: If you have bad credit, need a car, but have no idea where to begin, we want you to know that Auto Credit Express specializes in placing borrowers who have tattered credit with dealerships that can offer them their best chances for an auto loan approval.

So if you're ready to begin the process, you can start now by filling out our online auto loan application.