Vehicle financing delinquency avoidable – if you plan ahead


The following post originally appeared on our RoadLoans blog, The Open Road.

Don’t be a delinquent.

That sometimes is easier said than done when you’re trying to pay off a new car, SUV or truck on limited income to banks and finance companies.

The time to think about the potential for a payment delinquency is before it happens – when you may be able to do something about it – not after it has occurred. Unfortunately, after the fact is precisely when a lot of people begin to think about a delinquency.

Preventing delinquency, which could forestall a significant damage to your credit score or rating, should begin when you start thinking about financing a new vehicle. Most experts agree that planning your purchase thoroughly is the best way to avoid payment difficulties later.

The lower your credit score, the fewer options you will have available to you with your car financing, such as lower loan amounts and higher interest rates.

“That does not mean, however, that a lower number will eliminate your auto finance options completely,” according to, an online lender that specializes in helping people with bruised credit. “It just means that you might have to work a little harder, put more money down, or take a higher interest rate.” Or settle for a less expensive car than you may have had in mind – which might even mean purchasing a used car instead of a new one.

Planning a vehicle purchase includes:

  • Creating a family budget to determine how much money is available for a vehicle payment without endangering other obligations and how much vehicle you can afford.
  • Shopping for the best financing term and interest rate.
  • Considering online lenders, as well as banks and other financial services providers.
  • Using online resources and interest rate calculators provided by lenders such as

If you get your financing from a company such as, which approves applications before a purchase, you can go to a dealer with financing in hand, setting you up to make a better deal.

This all becomes especially important as lenders compete for new business and accept riskier deals. “The increased competition among sub-prime lenders is resulting in more loans to borrowers of weaker credit quality,” said Peter McNally, a Moody’s Vice President and co-author of a report by Moody’s.

Delinquencies and repossessions were up in the first quarter of 2013, Automotive News reported.

If it’s too late to avoid financial difficulties – or those difficulties are out of your control – consider refinancing before you get behind on payments. You may pay more in the long run, but will avoid the damage a delinquency will do to your credit score and future financing applications.

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