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Auto Loan Delinquency, Default & Deferment —What’s the Difference?

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Can’t differentiate auto loan delinquency from default and default from deferment? We here at Colorado Springs Auto Approval Center wish to set things straight. Read the meanings of the terms below.



Delinquency happens when you fail to make the auto loan payment on the date it was due. When you sign the lending contract, you agree to its specific terms and conditions. Among those terms is the date on which the payment must be made. If you fail to pay by the said date, the loan becomes delinquent. Your lender may charge a fee for the delinquency.



A car loan default is the failure to make payments or make payments in full to the lender. Note that a default is not a one-time thing—it occurs when the debtor has repeatedly failed to repay. It is a delinquency if it happens once, but it is a default if missing the payments becomes consistent. If the loan is delinquent for a certain number of days, it goes into default.

The actual number of car payment failures that lead to a default varies. The number of payment failures that make a default is stated on the car loan agreement. Depending on the lender, the default can be either 30, 60 or 90 days late of repayment. It can also be up to 120 days.

In the event of a default, the lender may send a written notice requesting you to settle the remaining balance or have your car repossessed. The repossessed vehicle will be sold at an auction and the amount from the sale will be used to settle the loan. If the vehicle sells for less than the loan’s remaining balance, you will need to pay the difference.



While delinquency and default deals with non-payment, deferment deals with payment—specifically delayed payment. As the word suggests, the payment will be put off. Deferment involves yet another agreement between the lender and the borrower, this time about the postponement of payments for a set period of time. With deferment, instead of you having to pay for the current month at the set date, you will make the payment at an agreed later date. A deferment plan should be in place prior to a delinquency or default.


Note to Car Buyers

Delinquency and default are major problems, while deferment helps prevent them. If the individual foresees that he or she will be unable to make car payments on time or just make payments due to whatever reason, he or she should immediately contact the lender and find out if they will allow a deferred payment. Once the lender agrees to deferment, the loan will not be delinquent or go into default. Both delinquency and default hurt credit rating.

Hence, if you are having financial difficulties and don’t think you can make a full payment or make any payment at all on your auto loan, the last thing you should do is avoid your lender. Financial difficulties are reason enough for you to call your lender and avoid bigger problems later on. Know that most lenders will work with customers to address payment issues. Doing so would be more advantageous for them as well—it is better to have a delayed payment than no payment at all.

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