By: Kate Butler and Jacob Huther

Defaulting on a loan can affect your life for years to come. Now more than ever, young adults are defaulting on auto loans at an alarming rate. According to a recent NBC News article, TransUnion data comparing prepandemic and current default rates for Generation Z (Gen Z) and millennial car owners shows startling differences.

In 2019, before the pandemic began, Gen Z had a past-due rate of 1.75%. Today, past-due rates have reached as high as 2.21% among Gen Z car owners. Similarly, millennials now show increased past-due rates of 2.14%, compared with 1.66% before the pandemic.

Preventing loan default in the current financial landscape can be challenging ? especially for individuals early in their careers and learning to balance new expenses with financial freedom. To help you navigate these potential financial challenges, we cover the consequences of defaulting on a car loan and the best methods to prevent loan default.
What Does It Mean To Default on an Auto Loan"

Defaulting on an auto loan means you have missed a payment or stopped paying back what you owe on your car. To pay off a loan from a lender or dealership, you have to make monthly payments for the term length you agreed to in your loan contract. When you?ve completed all the payments, you gain ownership of the vehicle.

Though it varies by lender, your vehicle loan is likely to default after only one missed payment. Typically, your loan agreement will det...