What Happens When You Defer a Car Payment?
From time to time nearly every loan borrower finds themselves struggling to make ends meet to pay their car loans. Whether an emergency has come up, a payday doesn’t fall when expected, or additional bills and payments have popped up, finding the money to make a full car payment can sometimes be difficult.
Deferring payments is an option a lot of lenders turn to from time to time. But what exactly happens when you defer a car payment? Will deferring an auto loan hurt your credit? Get the answers below.
What is a Deferment?
Deferring a payment means skipping monthly payments and adding them to the end of the loan. This allows borrowers more time to save money to make payments and may even lower the cost of monthly payments.
When Can I Defer Payments?
Some finance lenders allow borrowers to defer their payments at any time during their loan term. However, policy terms vary depending on the lender, so it is crucial that borrowers check in with their lenders when they are looking to defer payments. The amount of time borrows can defer payments also depends on the lender. Some finance lenders allow borrowers to defer multiple times over the course of a loan, a handful of times, or just once.
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Deferring payments is a great option for borrows who would otherwise have to skip a monthly payment. Borrowers should never skip a payment without deferring unless absolutely necessary. When a monthly payment is skipped without notice the borrower’s credit score can take a hit and drop. If a borrower has their deferment approved prior to passing the payment date their credit score remains unaffected.
Deferring Car Payments: Pros vs Cons
Payment Deferral Pros:
- Avoiding late fees
- Allows more time to refinance
- If you have equity deferment offers more time to sell your vehicle
- May prevent repossession
- Does not hurt credit scores
Payment Deferral Cons:
- Depending on the lender, monthly interest payments may still be due
- Even if payments aren’t required, interest continues to grow
- Not a permanent fix
What Can I Do Instead of Deferring?
If you have reached your limit for deferring car payments, or maybe you just want to avoid deferring payments, another alternative is refinancing your car loan. Refinancing a loan means borrowers take out a new loan to pay off the current existing loan balance. This alternative is a good option for borrowers who are having trouble making their monthly car payments.
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Deferring car payments is a great option for borrowers looking to get temporary relief from loan payments. If you are looking for advice on your current vehicle loan terms, contact a member of the Friendly Kia team today.