 TITLE: How Bad Is It to Default on a Car Loan? CONTENT: Consequences of Defaulting on a Car Loan\n----------------------------------------\nDefaulting on a car loan can have serious consequences for your finances that can last for years. Ultimately, defaulting can make it harder to get approved for credit, such as mortgage loans or credit cards.\n**A late payment can negatively affect your credit score.** Because payment history is the biggest factor in credit scoring, accounting for 35% of your FICO® Score☉ (the most commonly used credit score among lenders), a single missed car payment can have a serious negative effect on your credit score. A delinquency on your loan payments will stay on your credit report for seven years.\n**Your car could be repossessed.** When you get an auto loan, the car serves as collateral for the loan, meaning the lender can take the car if you're delinquent. Depending on your state's laws and the terms of your loan agreement, a lender may be able to repossess your car as soon as you miss one loan payment, and they may not have to give you any warning. More commonly, though, lenders will contact you seeking the missed payments before they take the drastic step of repossessing the car.\nAfter repossessing a car, the lender typically sells it at auction to recoup the money you owe on the loan. If the sale doesn't net enough money to pay off your loan, however, the lender may turn to you for the rest of the money or even sue you to get it.\nAs for your credit score, having your car repossessed will further compound the negative impact of the delinquency and collection account on your credit history. A repossession is considered a serious derogatory mark on your credit report and will stay there for seven years.\n**Any remaining debt could be sent to collections.** Even after your car is repossessed, you could still face calls, emails and letters from collections agencies. Lenders sell repossessed cars at auction, and if it doesn't recoup the remaining balance of the loan financing it, you'll owe what's called a \"deficiency balance.\" Ultimately, the lender could sue you for the money you owe. Your wages could be garnished; a lien could be put on your home. Even if you pay off the debt, an account in collections remains on your credit report for seven years from the date of delinquency. END