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In 2022, the Federal Reserve started raising interest rates to cool inflation. That drove the cost of borrowing up across the board, from personal loans to home equity loans to auto loans.

Not surprisingly, auto loan delinquencies rose 2.1% in December 2023 compared to December 2022, according to recent VantageScore data. But falling behind on an auto loan could have serious consequences. Here’s what might happen to you if you don’t make your car payments when you’re supposed to.

1. Your credit score could take a dive

Any time you don’t pay a debt on time, your credit score gets dinged — a lot. Of the various factors that go into calculating your credit score, your payment history carries the most weight. A single late payment has the potential to cause a lot of credit score damage.

Once your credit score drops, a couple of things happen. First, it can become more difficult to get approved for a new loan or line of credit when you need it. Secondly, you might get approved to borrow, but at an interest rate that isn’t so favorable. Either way, you might lose out financially.

2. You could face late payment fees

Depending on the terms of your auto loan, not making your payments on time could subject you to late fees. You’ll need to read through your loan document to understand when those fees apply and how much they might amount to.

Now, it’s worth noting that if you’re late making an auto loan payment once, but you have an otherwise good history of being timely with your payments, you can contact your lender and ask for a reprieve. It may be willing to waive the fee for a first-time offense. But if you’re a repeat offender, don’t expect the same leeway.

3. Your car could eventually be repossessed

A single missed auto loan payment generally won’t result in having your car repossessed. But falling too far behind might subject you to that fate. And losing your vehicle could have seriously negative repercussions.

For one thing, you might lose your job if you don’t have a way to get there. You might also have difficulty functioning in general. Even if you live in a neighborhood with access to grocery stores on foot, hauling home several bags’ worth of food isn’t easy when you don’t have a vehicle whose trunk you can fill.

Speak up if you’re having trouble making your car payments

All told, not making your auto loan payments is bad news. If money has gotten tight or you’re in the midst of a specific financial hardship that’s suddenly rendered your loan unpayable, don’t stay silent about it. Instead, reach out to your lender, explain what’s going on, and try to work something out.

Your lender might agree to let you pause your payments for a period or lower your payments to make them more affordable. There’s nothing to lose by reaching out to discuss your options — but you have a lot to lose by blowing off those payments altogether, even if you’re doing so out of necessity.

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