We all go through difficult periods from time to time – that’s life. But when those challenges revolve around your financial situation, it can keep you awake at night; especially if you happen to have an auto loan that needs to be paid. Such a predicament can send nearly anyone into panic mode.
If you’re in this situation, you may be wondering what will happen – or what your options are – if you default on an auto loan in Alberta. Will your car be repossessed? Will your credit score take a hit? Will you face jail time? Etc.
Keep reading for additional information on what will happen if you default on your auto loan in Alberta.
The Fallout of Defaulting on Your Auto Loan
Upon missing the due date for your car payment, typically, the first course of action the lender will take is a “slap on the wrist” late fee. There may be (or there may not be) a grace period to allow you to get it together. Usually, these timelines are a few days to a week.
This will provide you with enough leeway to get your account current. If, after 30 days, however, you have failed to get your payment current, the lender will contact you via phone call or email. Ignoring these messages will result in more “friendly reminders.”
If this pattern continues, things will begin getting worse as the calls and emails become more frequent.
How Does Defaulting on my Auto Loan Impact my Credit Score?
It’s critical to ensure your credit score remains in good shape. The reason being is that a healthy credit score will give you better interest rates, and lower finance fees on credit card balances and other types of loans. This means you’ll pay your debts quicker and keep more money in your pocket.
However, if you begin defaulting on your auto loan payments, your credit score will take a hit. Missing auto loan payments will result in your lender reporting these transgressions to either Equifax or TransUnion (Canadian credit report agencies).
This entails that when you default and stop making your payments, the credit agency will be notified and made aware of your lapse in judgment. And as a result, your credit score will be negatively impacted.
This can cause a weaker credit score, and if it continues, it can have a lasting impact on your financial future as a whole.
Will I Go to Jail for Defaulting on my Auto Loan?
It’s a very uneasy feeling when you’re unable to make your payment on your auto loan: lenders are calling, your credit score suffers, late fees accrue, etc. All of this can produce a lot of fear, worry, and anxiety.
Many people carry the fear that they may be arrested if they’re unable to produce the money needed to become current on their loan.
And while you should absolutely do all you can to make your auto payments (or get caught up if you’ve fallen behind), you can’t be arrested for defaulting on your auto loan. So if you are past due, don’t worry about being thrown behind bars. Instead, focus your attention and energy on simply trying to get current.
Conclusion
Staying on top of your payment obligations is the best way to ensure your financial future remains intact. Failing to do so can result in accumulated late fees, a damaged credit score, and an unpleasant barrage of emails and phone calls from lenders. All of which can be avoided as long as you remain current on your payments.
If you’re in need of assistance in the form of a loan, we here at Cash Loan Alberta provide equity loans for residents across this great province. Contact us today to speak with one of our loan specialists to see how we can help.
