The Miami Herald recently reported that the late-payment rate for U.S. auto loans jumped in the fourth quarter of 2013. According to TransUnion, car payments late by 60 days or over increased to 1.14 percent in last year’s October to December period.
Being late on your car loan payment is never a good thing—a single late payment can hurt your credit score and several can result in the repossession of your vehicle. Here are some ways you can avoid making late payments on your car loan:
- Note down the due date
Know when the car payment is due so you wouldn’t be late, and jot down the date. But instead of recording the actual due date, note down a date that is a few days before the actual due date. This will allow you to prepare your payment in advance.
You can note it down on a wall or desk calendar, or a paper or electronic organizer. You may also do what most people do nowadays: record it on the smartphone. It doesn’t matter how or where you record it; what counts is that you record the due date with the option that works best for you.
- Set reminders
Noting down the due date is one thing; remembering it is another. It can be easy to miss the date even if you have recorded it, so make sure to remind yourself. How? You can take advantage of free cellphone or email reminder services that let you receive alerts. CarMax, a leader in the used-car industry, enables their customers to sign up for payment reminder emails through their CarMax Auto Finance Account. Contact your lender and ask if such service is available and how you can avail of it.
- Automate payment
There is a good reason experts recommend automating bills payment: you are less likely to forget payment if it is done automatically. You can have your loan payment withdrawn directly from your account on schedule so you need not miss a payment. Ally and Wells Fargo are two lenders that offer automatic payment options to customers to make loan repayment much easier. Find out if you can arrange to have your car payments made automatically and do it as soon as possible.
- Contact your lender
The first three suggestions will help you avoid late payment if the problem is mainly forgetfulness on your part. However, if the problem is monetary, you need to call your lender immediately. If you are struggling financially, contact your lender before you miss a payment and explain your situation. Your lender may come up with an arrangement that will make repayment possible for you despite your financial situation, such as loan modification.
It is crucial to contact the lender before you miss a payment, not after. The lender will more be willing to work with you if you approach them before the due date, and your credit will not be affected. The longer you are late on your car payment, the bigger the effect on your credit score.