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Deferring a Car Loan Payment in Canada: Everything to Know

Deferring a Car Loan Payment in Canada: Everything to Know

Sometimes the finances pile and pile on, be it an unexpected accident or the sudden need to replace something expensive, you need some breathing room. That’s exactly where a loan deferral comes in, but what is that? How does it work? And how do you get one? All of those questions will be answered in this article.


What is a Deferral?

So what is a deferral? Essentially it’s a pause on your required loan payments for a small amount of time, usually one or 2 months. During this period your loan will still gain interest, which means deferring a loan won’t save you any money (in fact it will cost you some extra in the long term).


By necessity deferring a loan will make your loan term last longer, as you’ll still have to make the payments you deferred, they’re simply added onto the end of your loan period.


Why Might You Defer a Car Payment?

So if it’s just going to cost you a little bit more money then what exactly is the point of getting a deferral? While it’s fair to say that a deferral is only useful in specific situations, it is very useful in those situations for 2 reasons.


The situation that you’d need a deferral in is generally when you suddenly need money for something unexpected or have unexpectedly lost a source of income. Either scenario meaning that you can’t afford to pay your loan payment for the month. A deferral means that you can access that money that would normally go towards your loan, and more importantly, it won’t be marked as a missed payment on your credit history, and have a negative impact on your credit score.


If you're in a situation that requires you to miss several months of loan payments then a deferral is likely not going to solve the problem and you may need to actually cancel the loan instead. As said, deferrals are very situational.


How to Get a Deferral

There isn’t any special system you have to go through to get a deferral, simply approach the holder of your loan and ask for one. They’ll want to know the specifics of your situation before they grant you one, but if your needs are genuine then it’s likely that they’ll say yes.


If you need to get multiple deferrals on a single loan, that’s when things get more complicated, and lenders will start to get worried about your ability to repay the loan. It’s extremely unlikely that any lender will grant you a deferral longer than 3 months, and that’s only for the highest credit scoring customers.


Hopefully you feel confident in what you need to do to defer a car payment! If you have any more questions, please don't hesitate to contact us here.

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