Your when ready options when a payment is due
If a car payment is due and you don't have the money, you have a few paths forward, and the one you choose matters because it affects what happens next. You can contact your lender before the payment is late, ask your lender about a temporary pause or modification, sell the car, refinance the loan, or let the car be repossessed. None of these is painless, but some preserve your credit and your transportation more than others.
The single most important step is to call your lender before the payment is due or within a few days of missing it. Lenders expect some borrowers to struggle, and many have formal programs for this situation. If you wait until you're 60 days behind, your options narrow and the damage to your credit report is already done.
Key Takeaways
- Contact your lender when ready if you know a payment will be late—most have hardship programs that can pause or reduce payments temporarily without reporting you to credit bureaus.
- Refinancing or taking out a personal loan to cover the payment can lower your monthly obligation but costs money upfront and may not be available if your credit has already dropped.
- Selling the car privately or to a dealer can eliminate the payment entirely, though you may owe the difference if the sale price is less than what you still owe on the loan.
- Voluntary surrender (returning the car to the lender) damages your credit less than repossession but still leaves you owing the gap between the car's auction price and your loan balance.
- Repossession happens after repeated missed payments and results in a damaged credit report, a deficiency judgment against you, and loss of the vehicle.
Contacting your lender about a payment pause or modification
Most car lenders have hardship programs that allow you to pause, reduce, or skip a payment for a set period—usually one to three months. These are not loan forgiveness; the skipped payment is typically added to the end of your loan or spread across remaining payments. The key is that if you call before you miss the payment, many lenders will not report the arrangement to credit bureaus.
When you call, have your loan number ready and be direct about your situation: job loss, medical emergency, reduced hours, or unexpected expense. Lenders hear this regularly and have a process for it. Ask specifically whether the arrangement will appear on your credit report. Some lenders call this a loan modification, forbearance, or deferment—the names vary, but the function is the same. Get the agreement in writing, including the new payment schedule and the date payments resume.
If your lender denies a hardship request or you've already missed a payment, ask whether they offer a reinstatement plan. This lets you catch up on missed payments over a few months rather than in a lump sum. Again, ask whether it reports to credit bureaus and get it in writing.
Refinancing or consolidating the car loan
Refinancing means taking out a new loan to pay off the old one, ideally at a lower interest rate or with a longer term that reduces your monthly payment. A longer term means you pay more interest overall, but it lowers what you owe each month. This works only if your credit score is still decent (usually 620 or higher) and if you have equity in the car or at least owe less than it's worth.
You can refinance through a bank, credit union, or online lender. Credit unions often offer lower rates than banks if you're a member. The process takes one to two weeks. You'll need proof of income, your current loan documents, and the car's title or registration. If you've already missed a payment, refinancing becomes much harder because the missed payment appears on your credit report when ready.
An alternative is a personal loan from a bank or online lender, which you use to pay off the car loan in full. Personal loans often have higher interest rates than car loans, so this makes sense only if your car loan rate is already very high or if the personal loan's monthly payment is genuinely lower. Personal loans also don't require the car as collateral, so you keep it regardless.
Selling the car to eliminate the payment
If you sell the car—whether privately, to a dealer, or through an online marketplace—you can use the sale price to pay off what you owe the lender. If the car is worth more than you owe, you pocket the difference. If it's worth less, you still owe the lender the gap, called a deficiency.
For example: you owe $12,000 on a car worth $10,000. You sell it for $10,000. You still owe the lender $2,000. Some lenders will let you pay this over time; others demand it when ready. Ask your lender before you list the car whether they'll accept a payment plan on a deficiency.
Selling privately usually nets you more money than trading it to a dealer, but it takes longer and requires you to handle paperwork. Dealers buy cars outright and handle the lender payoff, which is faster but pays you less. Online marketplaces like Carvana or Vroom offer quotes in minutes and handle the lender contact, though their offers are typically lower than private sales.
Voluntary surrender versus repossession
If you cannot pay and cannot sell the car, you can return it to the lender yourself—this is called voluntary surrender. You contact the lender, tell them you're returning the vehicle, and arrange a time and place to hand over the keys and title. You stop making payments at that point.
Voluntary surrender damages your credit report, but less severely than repossession. Both result in a deficiency if the car sells for less than you owe, and both appear on your credit report for seven years. The difference is that with voluntary surrender, you control the timing and avoid the cost and humiliation of a repossession agent showing up at your home or workplace. You also demonstrate to the lender that you're cooperating, which sometimes makes them more willing to negotiate a deficiency payment plan.
Repossession happens when you miss payments and don't contact the lender. The lender hires a repo company to locate and take the car, usually without warning. You lose the car, the repo appears on your credit report, and you still owe the deficiency. Repossession also costs money—repo fees, storage fees, and auction fees—which the lender adds to what you owe.
If repossession is imminent, voluntary surrender is the better choice. Call the lender and ask how to proceed. Some lenders have a formal process; others will tell you to bring the car to a local dealership or office.
Understanding deficiency judgments and what happens after
After a car is repossessed or voluntarily surrendered, the lender auctions it. If the auction price is less than what you owe, the lender can pursue you for the deficiency in most states. They do this by filing a lawsuit and obtaining a deficiency judgment, which allows them to garnish your wages, place a lien on your bank account, or pursue other collection actions.
Some states have laws that limit or prohibit deficiency judgments, particularly if the car was repossessed. California, for example, prohibits deficiency judgments on cars repossessed from consumers. Check your state's laws or ask a legal aid organization in your area whether deficiency judgments are allowed where you live.
Even if a deficiency judgment is issued, you can negotiate a settlement. Lenders often accept 40 to 60 cents on the dollar rather than pursue years of collection efforts. If you receive a lawsuit notice, respond to it—ignoring it results in a default judgment, which is harder to fight.
How missed payments affect your credit and what comes next
A missed car payment appears on your credit report 30 days after the due date. At 60 days late, the lender typically reports it as a serious delinquency. At 90 days late, repossession becomes legally possible in most states, though lenders vary in how quickly they act. Some wait 120 days; others move faster.
Each missed payment drops your credit score by 50 to 100 points, depending on your starting score and credit history. A single missed payment can drop a good score into the "fair" range. Multiple missed payments can push you into the "poor" range, making it hard to borrow money, rent an apartment, or sometimes even get a job.
The missed payment stays on your credit report for seven years from the date you first missed it. After seven years, it falls off automatically. In the meantime, its impact on your score decreases over time—a missed payment from two years ago hurts less than one from two months ago.
Frequently Asked Questions
What happens if I just stop paying and ignore the lender's calls?
The lender will report you to credit bureaus, sue you for the debt, and eventually repossess the car. You'll owe the deficiency, face potential wage garnishment, and have a severely damaged credit report for seven years. Ignoring the problem makes it worse. Calling the lender, even to say you can't pay right now, is always better than silence.
Can the lender take the car if I'm only one payment behind?
Legally, most lenders can repossess after one missed payment, though many wait until you're 60 to 90 days behind. The loan contract you signed likely says the lender can repossess if you default, and one missed payment is technically a default. In practice, lenders use repossession as a last resort, but it's possible. This is why calling before you miss a payment matters.
If I refinance, do I have to keep the same car?
No. Refinancing pays off your existing loan, and you can use the new loan however you want—including to pay off the car loan and buy a different, cheaper car. However, if the new car is worth less than the refinance amount, you'll be underwater on the new loan when ready. It's usually better to refinance the existing car or sell it and buy something cheaper outright.
Will a hardship program hurt my credit?
Not if you arrange it before you miss a payment. Many lenders don't report hardship programs to credit bureaus at all. However, if you've already missed a payment, that missed payment is already on your report, and a hardship program won't erase it. Always ask the lender whether the arrangement will appear on your credit report before you agree to it.
What if I owe more on the car than it's worth?
You're underwater on the loan. Selling the car won't eliminate the debt—you'll still owe the deficiency. Refinancing is difficult because lenders won't lend more than the car is worth. Your best options are to keep making payments until you're no longer underwater, or to negotiate a settlement with the lender if you can't pay. Voluntary surrender or repossession will still leave you owing the deficiency.