Missed car loan EMIs: There are many repercussions for delaying and defaulting on a car loan.
Buying your car is like a dream come true, but this dream can turn into a nightmare if you fail to repay or delay in paying back the loan. There are many repercussions for delaying and defaulting on a car loan.
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One of the worst consequences could be that your vehicle can be taken back. A car loan is a secured loan, and your vehicle is used as collateral against the funds you borrow. The lender can take the car back from you if you fail to pay back the loan as per the agreement.
It is important to go through the loan document carefully and understand the liabilities before you sign the papers and accept the terms and conditions of the loan. Once the loan is disbursed, you must repay the amount in EMIs. Here are some consequences you may face when you delay or default on your car loan.
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Negative impact on credit score: If you miss your car loan EMI payment, you will likely be charged a late payment fee by the lender. Missing car loan EMI payments can have a negative impact on your credit score, as payment history is a significant factor in determining your creditworthiness for future loans.
Accumulated interest: Missing EMI payments can lead to the accumulation of interest, which means that you will end up paying more interest over the life of the loan. If you miss multiple EMI payments, you may be charged penalty charges by the lender, which can significantly increase the cost of the loan.
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Legal action: In some cases, if you miss EMI payments for an extended period, the lender may take legal action against you to recover the outstanding amount. Missed EMI payments can negatively impact your chances of getting approved for future loans, as lenders may view you as a risky borrower.
Repossession of the car: If you miss multiple EMI payments and fail to reach an agreement with the lender, the lender may repossess your car as collateral. Missing EMI payments can result in collection calls and letters from the lender or their collection agency, which can be stressful and disruptive.
Damage to your relationship with the lender: Missing EMI payments can damage your relationship with the lender, making it more difficult to negotiate payment terms or seek assistance in the future. Financial stress and anxiety can arise from missed car loan EMI payments as you may worry about the impact on your credit score, and the possibility of a legal action.
Stress and anxiety: Financial stress and anxiety can arise from missed car loan EMI payments as you may worry about the impact on your credit score, and the possibility of a legal action.
Adhil Shetty, CEO, Bankbazaar.com, says, “If you default on your car loan, the lender may repossess your car as collateral. This means that you will lose your car and may still owe money on the loan. You may be charged late fees, penalty interest rates, and collection fees if you miss payments or default.”
It is, therefore, advisable to borrow only as much as you can comfortably pay back. In case you are finding it difficult to repay the loan, you can always sell your car or arrange money to partially prepay your loan or talk to your lender to help you find a solution.
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LOAN default
* Borrow only as much as you can comfortably pay back
* You may be charged late fees, penalty interest, and collection fees if you default
* If needed, sell the car or arrange money to partially prepay loan
* At worst, the lender may take away your car as collateral
