Everyone needs access to extra cash from time to time. It could be for a medical bill, car repairs, or simply the need for additional spending money during the holidays. Having extra cash on hand is always welcome. If you’re looking for a practical solution, consider skipping a loan payment, typically called Skip a Payment programs.
You may have seen Skip a Payment offers before, or perhaps you have done one before. However, it’s crucial to understand how they work and be aware of potential drawbacks. In this article, we’ll dive deeper into how skipping loan payments work and the impact it can have on your loan and wallet.
What is a Skip a Payment Program?
A Skip a Payment offer is exactly as it sounds – the ability to skip one of your monthly loan payments. These programs or promotions are commonly found during the summer and winter holidays. Some institutions offer them year-round, which is what Money FCU does. If you’re facing a financial setback, or just need some extra cash, your lender may offer to delay one of your loan payments to free up some money.
How It Works:
Each lender will have their own process and rules for skipping loan payments. However, these offers typically follow a similar format.
1. Choose the Loan(s) to Skip
Lenders will often restrict which loans qualify for skip a payment promotions. Due to the type of loan and lending rules, you typically cannot skip home loans, such as mortgages or home equity loans. Likewise, credit card payments are generally handled differently than traditional loan payments, and are often excluded from these programs.
The most common loans to skip include auto loans and personal (signature) loans.
2. Pay Any Necessary Fees or Charges
Skip a payment programs often charge a small fee for each loan you skip. You can you find Money FCU’s fee on our Skip Pass. These charges are used to cover the cost of restructuring your loan payment.
3. Skip Your Loan Payment
Now, you can skip your next monthly loan payment(s). It’s important to note that when you delay a loan payment, that payment amount simply moves to the end of your loan. This will generally extend your loan’s final payment date by one month. For example, if your loan is scheduled to be paid off in March 2026 and you skip a payment, your new loan payoff date will be in April 2026.
Why Would You Skip a Loan Payment?
There are a number of reasons you might choose to skip a payment. Most commonly, it’s to give yourself access to extra cash. Imagine your monthly car payment is $400. If you skip a payment, that’s $400 you can use for something else.
The impact is even more significant if you have multiple loans. If you and your spouse each have an auto loan, and the payments are $400 and $550, that’s $950 back in your wallet today (minus any skip-a-payment costs).
These promotions can be ideal in the following circumstances:
- Vacation Funds: Boost your vacation budget by skipping your loan payments vs. relying on high-interest credit cards.
- Holiday Shopping: Between gifts, travel, and entertainment, the winter holidays can get pricey. Skip a payment programs provide a low-cost option to extend your budget. If that’s still not enough extra cushion, ask about a Christmas Loan.
- Financial Setbacks: Unexpected expenses always pop up. Whether it’s an unplanned medical bill or car repair, skipping a loan payment can help you cover the costs without taking on new debt.
- Credit Card Debt: High-interest credit cards can cause significant financial challenges. Paying a nominal fee to skip your car payment can help free up cash to pay down high-interest debt that eats away at your monthly budget.
- Balancing Your Budget: Following a budget can be challenging at times. Skipping your loan payment(s) could help you balance your budget and get back on track with your financial goals.
Are There Any Drawbacks?
While there are many advantages to skip a payment programs, there can be some downsides. It’s best to consider the pros and cons when it comes to financial decisions.
Interest Accrues:
When you skip a loan payment, the interest continues to accrue during that period. This action might cause your last loan payment to be slightly higher, or your loan payoff date could be extended to make up the interest charges. However, these charges are usually minimal since auto and personal loans are the most commonly skipped loans.
Extended Loan Term:
Again, when you skip a loan payment, the delayed payment is added to the end of your loan, extending your term by one month. This aspect is not usually a big deal, unless you begin to use skip a payment options regularly.
Most lenders will restrict how often you can skip a payment to prevent it from negatively affecting your loan. For example, Money FCU only allows one skip, per loan, per year. Be careful if you find other lenders who allow you to skip a payment more often. Pretend you have a 6-year (72-month) auto loan, and you skip a payment every six months. That would equate to twelve skipped payments. It would add an entire year to your loan. This strategy can cause you to generate negative equity in your loan. That’s why most lenders will prevent this by restricting additional skips after a certain number.
Takeaway
Skip a payment programs are a great way to put extra cash in your pocket or get back on financial track after a setback. However, like all financial tools and incentives, you must use them responsibly. If you plan to skip a loan payment, ensure you understand your new payoff date and any costs associated with the skip before signing up.
We’re Here to Help!
If you’re interested in learning more about skipping a loan payment or are facing a financial setback, don’t hesitate to contact us. Call, chat, text, or stop by! Our team is here to help M-F, 9am-4pm ET. (315) 671-4000.
Each individual’s financial situation is unique and readers are encouraged to contact the Credit Union when seeking financial advice on the products and services discussed. This article is for educational purposes only; the authors assume no legal responsibility for the completeness or accuracy of the contents.
