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Do Auto Loans Have a Grace Period?

Most loans have a ten day grace period, auto loans are no exception. The exact grace period length should be stated in the loan agreement and on the payment stubs. The grace period is not generously provided by your lender; it is required by several different federal and state regulations.

The grace period came about after lenders were trying to repossess cars and foreclose on homes when borrowers were making payments a few days late. Many times, the borrower was sending the payment on time, but circumstances beyond their control would cause the payment to be delayed. Payments that are just a few days ”late” can occur because the payment is mailed, but not delivered by the due date, a check is not paid by the issuing institution by the due date, the due date is a holiday, the list goes on.

Once the grace period has expired, you will be subject to late fines and additional interest charges. In some instances a single late payment can raise your interest rate. If your payment is more than 30 days late, you may face repossession. Repossession is uncommon after one 30 day late payment, but if you make second late payment, you will most likely lose your vehicle.

About the Author

The author has many years of experience in automotive finance and insurance. However, each consumer's situation is unique. It is best to contact a finance specialist for further assistance.
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