Car Loan Deferral: Can You Defer a Payment? & How It's Done
Car Loan Deferral: Can You Defer a Payment? & How It's Done
Posted on March 2, 2024
A car loan is usually a fixed monthly payment you make on the same day every month until the loan is paid. It’s a long term financial commitment that doesn’t change for the length of the loan. There are occasions when you can change that or skip a payment.
These are called deferrals or deferments, depending on where you live.
A car loan deferment is where you request to skip a payment or two. You have to arrange these in advance and have a good reason for them, but most lenders will agree as long as you have a record of paying on time. This article should cover most of what there is to know about car loan deferrals - Let's dive right in.
Car Loan Deferment
It may be a good idea for you to defer a car loan payment if you come up against a situation where you cannot afford the next month’s payment or if you lose your job, have a huge repair bill, medical bill or something else.
A deferment can be used to skip a month or two or to lower the monthly payment temporarily. Skipping the payment altogether is most common but both are possible.
Can Anyone Defer a Car Loan?
Not all lenders offer deferment. If they do, it will be mentioned in the loan paperwork or on their website. Different lenders handle deferments differently. Some have a ‘Skip Payment’ option on their website, some require a written request and some just need you to call them and discuss it.
Some lenders will require justification with evidence and others will not. That evidence could be a medical bill, invoice for emergency home repairs, severance letter from work or other form of proof that you are in genuine need. Some lenders don’t need anything like that and you just have to ask. There is no set rule here.
Deferment and Your Credit Score
As long as you arrange the deferment in advance, with the agreement of the lender, it will not impact your credit score. All that happens is that you are exercising an option within your loan agreement or requesting a simple deferment.
That month’s payment will be added onto the end of your loan. So if you had 13 months left and defer for 1 month, you will have 14 months left. If you request a longer deferment, that will be added on too.
Remember, deferments will include interest. The longer you defer, the more extra interest you will accrue. This is often a minor consideration if you’re in a position to need a deferment but it is something you need to think about.
If you find yourself in a situation where you're struggling and need to defer a car loan payment, don’t ignore it. Work with the lender, talk to them and involve them in the process. They are much more likely to work with you if you discuss it with them at the time. Missing a payment without a deferment agreement will count as defaulting and will impact your credit score.
Thanks for reading! If you have any more questions about deferring a car loan payment in Canada, contact us here.