At a time when the economies around the world are facing unprecedented unemployment percentages, grim job prospects, and high inflation rates, individuals who once had great credit and made payment of bills on time now face the fear of defaulting on their loans.
Probably the next big thing on your monthly budgets after the mortgage loan is the car loan. And you would not want to default on this for obvious reasons. One, it will destroy your credit history and two you might lose your car to the repossession man!
But when does a default actually happen? Does making a deferred or skipping the payment for a month or so constitute a default? Will your car be repossessed then?
When does a default happen?
Technically, a car loan default happens when a customer repeatedly fails to make the agreed car loan payments to the lender/bank that lent the money for its purchase. But is there a prescribed number of payment failure mentioned? Yes.
Usually, the car loan agreement that you signed with your lender/bank will have these terms clearly spelt out. Everything about your car loan, your loan repayment obligations and when you are in default are usually explained here. The agreement may also provide the risks involved and the possible solutions in case of a default.
Though the term 'default' has no universal definition to it and differs from case to case, the general meaning of 'default' is if you are 30, 60 or 90 days late on not making one or more payments. Having said this it is vital to know what you should be doing when you wake up to the fact that you might have big difficulties in making your car loan payment for the month and avoid being tagged a customer at 'default'.