“`html

Understanding Car Payment Deferment

If you’re facing a financial emergency and can’t cover this month’s car payment, a deferment on the loan could provide some breathing room. While it comes at a cost, it may be worth it to avoid the possibility of repossession.

Can You Defer a Car Payment?

Loan deferment is a temporary suspension or reduction of payments for borrowers experiencing financial hardships. If you’re eligible and communicate your situation to your lender in time, they may offer loan deferment to prevent you from defaulting on your loan. Eligibility depends on your lender, loan agreement, and the current status of your loan.

Not all auto lenders grant loan deferments. If yours does, it may have specific requirements, such as:

• Being current on your loan payments with no previous missed payments.
• Not having had another deferment recently, as some lenders limit the number and frequency of deferments.

A deferment may allow you to skip your payment altogether or make a reduced payment consisting only of the interest portion. Any skipped or reduced payments will be added to the end of your repayment term, and interest will continue to accrue. Additionally, you could be charged a fee for each skipped payment. Consult your loan agreement or ask your lender for details.

How Does Deferring a Car Payment Work?

Auto lenders that allow payment deferment have different procedures for requesting them, including:

• Skip a payment: Sometimes a deferment option is included in your loan setup, and a “Skip a payment” option appears on the payment webpage or as a special coupon in your payment book. Note that there may be a fee associated with using this option.
• Hardship letter: Some lenders require a written request in the form of a hardship letter, explaining why you need the deferment and when you’ll resume regular payments. Your lender may ask for pay stubs or other financial paperwork and review your credit score and report. If the lender agrees, it will issue a forbearance agreement for you to sign.

Reasons to Defer a Car Payment

Scenarios in which it might make sense to defer a car payment include:

• Experiencing a one-off financial hardship, such as an unexpected medical bill or car repair.
• Needing time to make new arrangements, such as selling the car, refinancing, or transferring the loan to someone else.

Does a Car Loan Deferment Hurt Your Credit?

If you obtain a deferment according to the terms of your loan agreement, it will not hurt your credit scores. However, failure to resume regular payments after a deferment or reducing payments without following required deferment rules can lead to negative credit report entries that can hurt credit scores.

How to Defer a Car Payment

1. Know Your Options: Review your loan agreement and the website where you pay your bills to understand the lender’s policy on loan deferment.
2. Prepare a Hardship Letter, if Needed: If your loan has a “skip a payment” option, use it if you’re within the rules. Otherwise, draft a letter including your name, address, loan ID number, amount paid, amount owed, reason for deferment, and when you expect to resume regular payments.
3. Supply Information Upon Request: Be prepared to furnish information such as bills documenting unexpected expenses and proof of income.

Alternatives to Car Payment Deferment

Consider these options if you’re having difficulty covering your car payment:

• Change your payment due date.
• Sell the car if it’s worth more than you owe.
• Refinance your loan for lower payments.
• Transfer the loan to someone else, if allowed by your lender.
• Ask your lender about other hardship options.
• Do a voluntary surrender as a last resort.

The Bottom Line

Car loan deferment is not an ideal option, but if you need a month or two of relief to get your payments back on track, it can provide the necessary room to maneuver. To understand how deferment may affect your credit score or to gauge your ability to qualify for auto refinancing, check your FICO® Score for free from Experian.

For any mortgage-related needs, call O1ne Mortgage at 213-732-3074. We’re here to help you navigate your financial journey with confidence.

“`