What to Do When You Can't Make Your Car Payment
Where to find help before you miss a payment
If you cannot make your car payment, contact your lender before the payment is due. Most lenders have hardship programs that can pause, reduce, or restructure your payments without damaging your credit. The lender's phone number is on your loan paperwork or monthly statement. When you call, tell them your situation clearly—job loss, medical emergency, reduced hours—and ask what options they offer.
Do not wait until you are late. A missed payment stays on your credit report for seven years, and your lender can repossess your car after one missed payment in most states. Calling ahead shows the lender you are trying to solve the problem, and they often have more flexibility before a default than after.
If you cannot reach your lender or they refuse to help, contact a nonprofit credit counselor through the National Foundation for Credit Counseling (NFCC) or the Financial Counseling Association (FCA). These counselors work with lenders on your behalf and do not charge you. You can find a counselor near you by visiting their websites or calling 211 (a free referral line in all 50 states).
Key Takeaways
- Call your lender before your payment is due to ask about hardship options like payment pauses, reductions, or loan restructuring.
- Most lenders have programs to help borrowers in temporary hardship and will work with you if you reach out early.
- A nonprofit credit counselor can negotiate with your lender on your behalf at no cost to you.
- Missing a payment can trigger repossession and damage your credit for seven years, so prevention is far cheaper than recovery.
- If you cannot afford the car long-term, selling it or returning it voluntarily is better than letting it be repossessed.
Hardship programs your lender may offer
Payment deferment delays one or more payments and adds them to the end of your loan. You do not pay anything that month, but you owe it later. This works if your hardship is temporary—a few weeks without income, a medical bill that clears up.
Payment reduction lowers your monthly payment for a set period, usually three to six months. Your loan term may extend to make up the difference. This works if your income has dropped but you still have some money coming in.
Loan modification changes the terms of your loan permanently—a lower interest rate, a longer term, or both. This is rarer and usually requires proof that your hardship is long-term, like a permanent job change.
Forbearance pauses your payments for a set time while you get back on your feet. Interest usually still accrues, so you owe more at the end. Ask whether interest will be added before you agree.
Every lender's programs are different. Some offer all four; some offer one. Ask your lender to send you the details in writing so you understand what you are agreeing to before you sign anything.
What happens if you cannot reach an agreement
If your lender will not work with you or you cannot afford any payment amount, you have two choices: sell the car or return it to the lender.
Selling the car means finding a private buyer or trading it to a dealer. You use the sale money to pay off what you owe the lender. If you owe more than the car is worth (called being "upside down"), you still owe the difference, but at least you stop the monthly payment. You can find the car's value on Kelley Blue Book or NADA Guides.
Returning the car voluntarily (called a voluntary surrender) stops the payments immediately. The lender sells the car at auction and applies the sale price to your loan balance. You still owe any amount left over, called a deficiency. A voluntary surrender damages your credit less than a repossession, but it still stays on your report for seven years. Call your lender and ask for the voluntary surrender process in writing.
Both options hurt your credit, but both are better than repossession. A repossession is more expensive for you (the lender charges towing and storage fees) and looks worse to future lenders.
Government and nonprofit programs that may help
Some states and cities have emergency car payment assistance for people facing hardship. These programs are not common and funding is limited, but they exist in some places. Call 211 or visit 211.org to search for programs in your area. Have your zip code ready.
Some nonprofits also offer small emergency loans or grants for transportation costs. Catholic Charities, the Salvation Army, and local community action agencies sometimes have these funds. Again, availability varies by location. A 211 counselor can tell you what exists where you live.
If you are a veteran, the Veterans Crisis Line (988 then press 1) can connect you to emergency financial resources. If you are over 60, Area Agencies on Aging sometimes help with transportation costs. These are narrow programs, but worth checking if you fit the category.
How to protect yourself during hardship
Keep all agreements with your lender in writing. If a lender agrees to defer a payment, ask them to email or mail you a confirmation. Do not rely on a phone conversation. If a dispute arises later, written proof protects you.
Make any payment you do make on time, even if it is reduced. A late payment on a reduced-payment plan can still trigger repossession. If you cannot make even the reduced amount, call your lender again immediately.
Do not ignore letters from your lender. If they send a notice of default or repossession, respond within the timeframe they give. Some states require lenders to give you a chance to catch up before they repossess. Missing that window costs you.
If your lender sells your car and you owe a deficiency, you may be able to negotiate a settlement for less than the full amount. A credit counselor can help with this negotiation.
How late payments and repossession affect your credit
A single late payment (30 days overdue) stays on your credit report for seven years and can lower your credit score by 100 points or more. A repossession is worse: it stays for seven years and signals to future lenders that you defaulted on a secured loan.
The damage is worst in the first two years. After two years, the impact weakens, but the record remains. After seven years, it falls off your report entirely.
During those seven years, you will pay higher interest rates on any new loans or credit cards you take out. Car loans will be harder to get. Some employers and landlords also check credit reports, so a repossession can affect housing and job prospects.
This is why calling your lender early matters so much. Preventing a late payment is worth far more than recovering from one.
Frequently Asked Questions
Can my lender repossess my car if I am one day late?
Legally, yes—most loan contracts allow repossession after one missed payment. In practice, most lenders wait 60 to 90 days before repossessing because they want to work with you first. But do not count on this. Call before you miss a payment to avoid the risk entirely.
If I do a payment deferment, do I have to pay all the deferred payments at once later?
No. Deferred payments are added to the end of your loan, so you pay them as part of your regular monthly payment over time. Ask your lender to show you the new payment schedule in writing so you know what to expect.
What if I sell my car but still owe money to the lender?
You owe the difference (the deficiency) to the lender. You can pay it in a lump sum or negotiate a payment plan. Some lenders will settle for less than the full amount if you offer to pay quickly. A credit counselor can help you negotiate this.
Does voluntary surrender hurt my credit as much as repossession?
Both damage your credit and stay on your report for seven years. Voluntary surrender is slightly better because it shows you tried to resolve the problem, but the difference is small. Both are serious marks.
Can I get a car loan after a repossession?
Yes, but you will pay a much higher interest rate and may need a larger down payment. Most lenders will consider you after two to three years have passed. Rebuilding your credit during that time (with a secured credit card or credit-builder loan) makes the next car loan cheaper.