Your first move: contact your lender before you miss a payment
Call your lender the moment you know a payment will be late. Do not wait until the payment is due or past due. Lenders have programs for temporary hardship—forbearance, payment deferral, loan modification—and they are far more willing to discuss them with you before you default than after. Your lender's phone number is on your loan documents or your monthly statement.
When you call, be direct about what happened: job loss, medical emergency, reduced hours, unexpected expense. Lenders hear these situations constantly and have processes for them. Have your loan number ready and be prepared to describe your income, your other debts, and how long you think the hardship will last. This conversation is not a negotiation—you are asking what options exist for your specific loan.
Write down the name of the person you spoke with, the date, the time, and what they told you. If they say something is possible, ask them to send it in writing or confirm it in a follow-up email. Verbal promises mean nothing if the lender later claims you never asked.
Key Takeaways
- Contact your lender before a payment is late, not after, because hardship programs exist but only if you ask before default.
- Forbearance pauses payments for a set period; deferral adds missed payments to the end of the loan; modification changes the terms permanently—each has different costs and credit impacts.
- If your lender will not work with you, a credit counselor through the National Foundation for Credit Counseling can review your full situation and sometimes negotiate on your behalf at no cost.
- Selling the car or refinancing are options only if you have equity or good credit, and both take time you may not have if a payment is already due.
- Repossession begins when you are 60 to 90 days behind, so the window to act is narrow—weeks, not months.
Forbearance, deferral, and modification: what each one costs you
Forbearance temporarily reduces or pauses your payments for a set period—usually two to six months. You still owe the full amount; the lender is straightforward giving you breathing room. At the end of the forbearance period, you resume normal payments. Some lenders allow you to add the paused amount to the end of your loan; others require a lump-sum payment when forbearance ends. Ask which applies to your loan before you agree.
Deferral is similar but the missed payments are added to the back of your loan, extending it by that many months. If you defer three months of payments, your loan gets three months longer and you pay interest on those deferred amounts. This costs more over time but spreads the catch-up across the remaining loan term instead of requiring a lump sum.
Modification permanently changes your loan terms—usually lowering your monthly payment by extending the loan, reducing the interest rate, or both. This is the most expensive option long-term because you pay interest for longer, but it can be the only sustainable choice if your income has permanently dropped. Modifications typically require a new promissory note and a credit check.
All three options will appear on your credit report as a hardship arrangement. This affects your credit score, but less severely than a missed payment or default. The damage is temporary; the alternative—repossession—is permanent and far worse.
If your lender says no or will not negotiate
Some lenders, particularly buy-here-pay-here dealers and subprime lenders, have minimal hardship programs. If your lender refuses to work with you, contact a credit counselor through the National Foundation for Credit Counseling (NFCC). Counselors are certified, work for nonprofits, and offer free or low-cost consultations. They can review your full financial picture and sometimes negotiate with your lender on your behalf—a neutral third party often has more success than you calling alone.
Find a counselor at nfcc.org or call 1-800-388-2227. Be prepared to discuss your income, all your debts, and your car payment. The counselor will tell you whether forbearance or deferral is realistic for your situation, or whether you need to consider other options.
If negotiation fails and you cannot afford the payment, you have three remaining paths: sell the car, refinance, or let it be repossessed. Each has serious consequences.
Selling the car or refinancing
If you own equity in the car—meaning the car is worth more than you owe—you can sell it privately, pay off the loan, and walk away. Check your car's value on Kelley Blue Book or NADA Guides using your vehicle's year, make, model, and mileage. Subtract what you owe from that value. If the number is positive, you have equity.
Selling takes time: listing, showing, negotiating, and closing typically takes two to four weeks. If your payment is due in days, this will not work. If you have a few weeks, it is worth exploring. You will need the title from your lender, and the lender must be present at closing to release the lien.
Refinancing means taking out a new loan with a different lender to pay off your current loan. This only works if you have decent credit (usually 620 or higher) and the new lender approves you. Refinancing can lower your monthly payment if you extend the loan term, but it costs money upfront and takes one to two weeks to close. If your credit has dropped because of missed payments, refinancing may not be an option.
What happens if you stop paying and do nothing
Repossession typically begins when you are 60 to 90 days behind on payments. The exact timeline depends on your state and your loan agreement. Once repossession starts, a company will locate your car and take it without warning—often at night or early morning. You have no right to retrieve personal items from the car, and you will be charged storage and towing fees.
After repossession, the lender sells the car at auction. If the sale price is less than what you owe, you are responsible for the difference—called a deficiency. A $20,000 car that sells for $12,000 leaves you owing $8,000 plus interest and collection costs. The lender can sue you for this amount, garnish your wages, or place a lien on your home depending on your state.
Repossession stays on your credit report for seven years and makes it nearly impossible to borrow money for a car, home, or anything else during that time. If you need a car for work, you will be forced into a subprime loan at a much higher rate. This is not a solution—it is a cascade of worse problems.
State-specific protections and right-to-cure laws
Some states require lenders to give you written notice and a period to catch up before repossession can begin. This is called a right-to-cure law. The cure period varies: some states allow 10 days, others 30 days or more. During this time, you can pay the overdue amount and stop repossession.
Other states require lenders to offer you a chance to reinstate the loan—paying all back payments plus fees—before they can repossess. A few states require lenders to offer forbearance or modification before repossession.
Look up your state's repossession laws on your state attorney general's website or search "[your state] right to cure car loan." Knowing your rights matters because some lenders ignore these laws, and knowing what they are supposed to do gives you leverage in negotiation. If a lender repossesses without following your state's process, you may have grounds to sue.
Temporary solutions while you stabilize
If forbearance or deferral buys you time to find work or increase income, use that time aggressively. Look for a second job, gig work, or overtime. Sell items you no longer need. Cut discretionary spending to the absolute minimum. The goal is to either resume payments or find a permanent solution before the forbearance period ends.
If you are in forbearance and your situation does not improve by the time it ends, contact your lender again before the first payment is due. Many lenders will grant a second forbearance or convert it to a modification if you show good faith—you stayed in touch, you did not disappear, and you tried to fix the problem.
If you are facing multiple debts and a car payment is only one of them, a credit counselor can help you prioritize. Some debts—like mortgage or rent—must come first. A counselor will help you decide whether to keep the car or let it go based on your full situation.
Frequently Asked Questions
Will forbearance hurt my credit score?
Yes, but less than a missed payment. Forbearance appears on your credit report as a hardship arrangement and typically lowers your score by 50 to 100 points. A missed payment lowers it by 100 to 200 points. The damage is temporary; most lenders stop reporting the hardship once you resume normal payments, and the mark fades over time.
Can I get forbearance if I am already 30 days late?
Possibly, but it is harder. Lenders are more willing to offer forbearance before you miss a payment. If you are already late, call when ready and explain what happened. Some lenders will still work with you; others will require you to catch up before they discuss options. The longer you wait, the fewer options you have.
What if I owe more than the car is worth?
You are underwater on the loan. Selling will not help because you will still owe the difference. Refinancing is unlikely because lenders do not want to refinance underwater loans. Your options are to keep the car and find a way to pay, pursue forbearance or modification, or let it be repossessed and deal with the deficiency later. A credit counselor can help you weigh these.
How long does forbearance last?
Typically two to six months, depending on your lender and your situation. Some lenders allow one forbearance period; others allow two. Ask your lender what the maximum is and what happens when it ends. If you need longer, ask about modification instead.
Can my lender repossess if I am in forbearance?
No. Once forbearance is approved, repossession is paused for the duration of the forbearance period. However, if you miss a payment after forbearance ends and do not resume payments, repossession can resume. Stay in contact with your lender as the forbearance period ends.