If you get vehicle financing in Canada but fail to pay back or frequently make late payments, your creditor won’t be very happy. Creditors are a critical aspect of financial life, as they act as the main pillar for loans. But it’s really tough to have a creditor breathing down your neck.
If you don’t pay off the loan that you have taken, your creditor can start legal proceedings against you. This article will help you know what happens if you don’t pay your car loan with details of other things you should know, so let’s start:
What If I Don’t Pay My Loan From Vehicle Financing in Canada?
Not paying dues for your vehicle financing in Canada can result in a range of negative outcomes, including:
- Fee Penalty: Every payment that you miss on your auto loan will result in a late fee, which will start to pile up.
- Delinquency: If you miss just one loan payment, your lender can report you to the credit bureaus (TransUnion and Equifax). This can leave a negative impact on your credit score and may also attract debt collection agencies.
- Car Repossession: This is also a possibility, and getting the vehicle back can be very challenging.
- Tainted Record: If you go down into the credit system as someone who didn’t make loan payment(s), you can be denied further loans or get them with very high interests in the future. The same goes for your insurance; you may have to pay very high premiums.
So What Are My Car Loan Repayment Options?
If you are genuinely unable to pay back the due amount on your vehicle financing in Canada due to financial problems, it’s better to talk to take the following approaches.
Talk To Your Lender:
This should be the first thing you need to do. Do not hesitate to take the matter to the lender because they’ll know it eventually when you stop making the payment. Break the ice early and try to work with them to make some kind of arrangements, including:
- Term Extension: Your lender may extend the repayment term of your loan, which in turn would reduce your monthly payment amount. However, this can increase the interest charges.
- Vehicle Trade-In: If you won’t be able to pay for several months, then you’ll have to trade in your car but remember the trade-in-value is usually less than the amount owed.
- Deferral: If you are tight on cash just for a small period of time, you can ask for payment deferral, which simply means asking the lender to receive a payment at a later date.
Use Your Payment Protection Insurance:
Payment protection insurance (PPI) is a very useful tool that you should use to your advantage. It’s basically an insurance policy that you can use to pay your debts if you have any hardships.
Just keep in mind that PPI only covers the minimum payment for a specific period of time. You can use that time to get back on your feet. The best part of PPI is that you can save your credit score from dropping.