Losing your job can place an extreme amount of pressure on anybody. Loss of income can also make it hard to repay your auto loan balance on a monthly basis. Thankfully, there are a few ways you can try and save your car and also your credit score, even in the face of having no income.
First and foremost, many consumers immediately think of two obvious options when it comes to losing their job while having an auto loan. However, these options tend to be the absolute worst options since they can take a very heavy toll on your credit score.
Usually, most consumers will simply stop making monthly payments on their auto loan. Ceasing payments on any loan is the worst possible choice you can make. Each and every single missed or late payment will ding your credit score, and once the lender seizes your car through repossession, your credit score can ultimately be destroyed.
Another common option most consumers think of is to simply give the car back to the lender. Often referred to as voluntary repossession, it can potentially damage your credit score as much as a regular repossession. Thankfully, there is one other option which can not only save your credit score but also allow you to keep your vehicle so you can continue your job hunt.
Typically, lenders have worked with thousands of people. Although it may seem unreal, most lenders understand that bad things can happen to good people. It is almost guaranteed that your lender has worked with people who just lost their job as well. Thankfully, one of the best solutions to keep your car while job hunting is to contact your lender first and notify them of your recent job loss.
The lender will usually offer you something called a deferment. In this situation, your lender will give you a grace period of 2-3 months to find another job without having to make payments on your auto loan. Your lender might even be able to remove any fees due to late payments or delinquencies. Lenders are heavily interested in getting their money back, and repossession is a long and expensive process that most lenders do not want to go through in the first place.
If you are granted a deferment on your auto loan payments, the lender will usually add the deferred payments to the end of the loan. Depending on your situation, your lender may be able to work out a plan for you to be able to keep your car and pay off your loan without experiencing damage to your credit score or credit report.