How To Prevent a Default on a Car Loan

By  //  June 25, 2023

If you struggle to make your car loan payment, it may be tempting to skip a few months. But skipping payments can lead to collections and other serious consequences. Here’s how to prevent a default on your car loan.

Refinance Your Car Loan

Refinancing your car loan is the best way to reduce the interest you pay and save money in the long run. When you refinance a car loan, you can get the following.

  • A lower monthly payment
  • A longer loan term (which means fewer payments)
  • More cash out of the deal than what was originally available when you took out your current auto loan

You might also consider refinancing if there has been an increase in interest rates since then or if there is some other reason why refinancing would benefit you financially.

Negotiate With Your Lender

If you are facing a default on your car loan, negotiate with your lender. It’s not uncommon for borrowers to request a lower interest rate, longer repayment period, or lower monthly payments to avoid defaulting on their loans.

Negotiating with bad credit car finance dealerships can be tricky because they don’t want to lose money by giving out concessions that could hurt their bottom line. However, there are times when it makes sense for them to do so, especially when dealing with people with good credit scores but struggling financially due to circumstances outside of their control, such as job loss.

Consider Debt Consolidation

If you have more than one loan with different interest rates, a debt consolidation loan can help you lower your monthly payments. However, if the interest rate on one of your loans is variable and not locked in yet, it may be worthwhile to wait until it is before applying for a consolidation loan.

A debt consolidation loan combines multiple loans into one new loan at a lower interest rate. This can make sense if the new payment is less than what you paid on all those debts separately, but only if the new rate doesn’t increase over time.

Find Someone Else to Take Over the Loan

You can find someone else to take over the loan to avoid defaulting. This is called a “buyout.”

You will want to ask the lender if they allow this. You may get out of your loan for a lower cost than what you would have paid if you were to keep paying it off.

Make sure that whoever takes over the loan is financially capable of handling it. You don’t want them to default on their payments as well.

Ask About Deferment Options

For those unable to make their car loan payments, deferment options can be helpful. Deferment allows you to postpone or temporarily stop making payments on your vehicle while still keeping it. You should know that this option is not forever. However, there are several ways to get approved for a deferment says CTN News.

  • If you are unemployed and cannot work due to illness or other reasons
  • If your income has dropped significantly since buying the car (if the lender approves)

If these situations apply to you, talk with your lender about getting approved for a deferment before defaulting on your loan.


A default on a car loan in Calgary can be disastrous, but it doesn’t have to be. With some research and planning, you can avoid this fate and save yourself from financial ruin. The most important thing is to know your options before going into debt with an auto loan. That way, you will already have backup plans when things get tough.