Yes, car loans through reputable lenders have a grace period. The grace period is typically ten calendar days.
History of the 10-Day Grace Period
In the past car loans did not have a grace period. If you were a single day past the due date, you would have late fees tacked on. That rigid policy created difficulties for borrowers and banks alike. Borrowers ran into due dates that fell between paychecks. Since some borrowers do not have enough money in savings to make their car payment, they would need to be a day or two late. Lenders would then be inundated with calls from borrowers needing to be a few days late, creating a customer service nightmare. The solution was the ten day grace period.
While the grace period prevents you from paying late fees, it does mark a line in the sand. You cannot make a payment after the grace period without a late fine. You will need to read through your loan documents to see how much the late fees are for your loan, but some banks charge as much as $50 for the first late payment.
The Impact of a Late Payment
A single late payment will damage your credit. The number of points that you will lose is directly tied to how high your score was prior to the late payment. A higher score (720 or above) can lose as much as 100 points, while a low score (599 or below) may only lose 20 points. The damage from a late payment will linger for quit a while. It can take up to a year for the damage from your first late payment of 30 days or less to dissipate. If your payment is more than 30 days late or you are late a second time within a 12 month period, it may take several years for the damage to disappear.
Knowing the Fine Print
It’s important to check with your lender about such terms. After all, they do vary from company to company. It’s best to inquire as to such specifics before you actually sign the loan, but if you’re like a lot of consumers, you are too excited to buy your new car to worry about such details. However, if you’re realizing you don’t know if your lender has grace periods or not, check with them now–it could save you a lot of money, not to mention a healthy credit score.