Are you able to pay off the car loan in order to avoid repossession? Advertiser Disclosure Advertiser Disclosure We are an independent, advertising-supported comparison service. Our mission is to help you make better financial choices by providing you with interactive tools and financial calculators, publishing original and objective content. We also allow users to conduct research and compare information for free – so that you can make informed financial decisions. Bankrate has agreements with issuers, including but not limited to, American Express, Bank of America, Capital One, Chase, Citi and Discover. How We Make Money The offers that appear on this website are provided by companies that pay us. This compensation can affect the way and when products are featured on this site, including for instance, the order in which they may be displayed within the categories listed, except where prohibited by law for our mortgage, home equity and other home loan products. However, this compensation will have no impact on the content we publish or the reviews that you see on this site. We do not contain the entire universe of businesses or financial offers that may be available to you. Srinrat Wuttichaikitcharoen/EyeEm/Getty Images
5 minutes read. Published November 28th, 2022.
The article was written by Sarah Sharkey Written by Contributing Writer Sarah Sharkey is a contributing writer for Bankrate. Sarah writes about a range of subjects, such as banking, savings tips, homebuying, homeownership and personal financial matters. Written by Rhys Subitch Editored by Auto loans editor Rhys has been writing and editing for Bankrate since late 2021. They are passionate about helping readers gain confidence to manage their finances with clear, well-researched facts that break down complex topics into manageable bites. The Bankrate promises
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We are compensated for the placement of sponsored products andservices or when you click on specific links on our site. This compensation could affect the way, location and in what order products are listed, except where prohibited by law. We also offer mortgage or home equity products, as well as other home lending products. Other elements, like our own website rules and whether a product is available within the area you reside in or is within your own personal credit score may also influence the way and place products are listed on this website. We strive to provide an array of offers, Bankrate does not include details about every credit or financial item or product. Car repossession has increased rapidly since 2020, according to reports . If you fall behind on your obligations and your car is in danger of being taken away, the good news is that you can take action to avoid this unfortunate outcome. Between reinstatement and loan modification you have a number of opportunities to prevent repossession. Can paying off a car loan prevent repossession? The rules of repossession vary based on the state you live in. In many states where repossession is allowed, the lender can repossess the vehicle as soon as you’re in default. Based on the terms of your loan agreement, that could be a result of missing just one payment. There are many steps between missing a payment to the final repossession of your vehicle. Based on your current situation you should take the appropriate actions . If you’ve not received any notification that you’re unable to make your auto payment, you’ll likely know about this financial fact before your lender will. Do not wait around for the lender to know that you fail to pay make sure you call the lender to explain your situation. The lender might be willing to listen to you in order to avoid the expense of repossession. You should try to reach an agreeable solution. For instance, you could offer more information about your situation, including when you’ll be able to make the next installment or what you can pay right now. Based on your past relationship with the lender it is possible that you will be able to negotiate an interim reprieve or . This is particularly true when this is the first time you have ever missed a payment. In the event that your lender has only sent notice to you, the lender is legally able to repossess your car with or without notice in many states. However, your lender will likely mail you a notice of its plans to take possession of the vehicle prior to when it actually occurs. If you receive notice of repossession your first contact you must make is to your lender. A clear line of communication between you and your lender could lead to the resolution that stops repossession. If you wait until you receive an email means you’ll be caught up when you explain the situation in front of your lender. If the lender is willing to listen to you out, offer as many details as possible regarding when you’ll be able to pay. Also volunteer how much you have available to put towards a payment now. In the end, it’s in the lender’s best interest to work out an arrangement that is temporary. In the end, the company is looking to be paid, and you’ll probably need your vehicle to go to work. Based your lender and your past an agreement that is temporary is not out of the possible. If the lender has already begun the process. If you are the lender has already begun the process of repossession and you do not be able access your vehicle. In this case, restitution to your loan or loan modification known as curing the default -may be the best option. In some states, you’ll be required to pay the entire past-due amount. That includes every missed payment plus any late fees which have accrued. In most cases, the lender may also require you to cover repossession fees prior to releasing the car to you. In some states, you could have to pay off the total loan to obtain your car back. This procedure is known as redemption. Not every state allows for reinstatement. If your state doesn’t have laws governing reinstatement and it’s not a part of your contract, you must nonetheless contact your lender. It might be willing to amend the terms of your loan so that it includes it. How auto repossession works repossession is a stressful experience. However, understanding the process will help you work through it and eventually discover a solution. 1. Borrower misses payments Your lender has the right to repossess the car in the event that you become in default, and then send it to a debt collection company. The number of missed payments required to be in default on your loan depends on your state and your loan contract. In certain cases, you will only need only miss one installment for you to be in default. In other situations, you might need to be late by two or three times to cause an issue. In this situation, clear dialogue with your lender is vitally important. If it’s possible to work out an extension, now’s the right time to inquire. 2. Lender will take your vehicle once in default Your lender may or not notify you of its intention to take possession of the vehicle. Call your lender to request an interim payment plan to avoid repossession if you get an official notice. Depending on your state the lender might be able repossess your car anytime — regardless of whether or not you’ve received a notification. 3. Lender sells the vehicle once the lender has possession of your vehicle the lender may hold the vehicle until you pay up on the loan. The most likely scenario is that the lender will eventually sell the car. In many states the lender must inform you of the sale and offer you the opportunity to reinstate your loan. If you decide to purchase the vehicle before the sale, you’ll have to pay the entire amount due and any fees associated with repossession. But many repossessed cars are sold through auction. You are entitled to be there and place an offer for your car. 4. Lender will send you a bill for any outstanding balance. After you sell the car, the lender has to use the funds to pay the debt you owe. However, the price you pay for the car could not be enough to pay your entire debt. If you owe more than what your lender gets in exchange for selling the car, that’s an indeficiency. In most states you can be sued by your lender may sue you for any deficiencies. For example, let’s say that you owe $10,000, but your lender is able to sell it at $7,000. In that scenario the amount owed is $3,000, and the lender may be entitled to sue you for the difference. However, if there is an excess from the sale and the lender could be required to pass it to you. It’s not common but should it occur, you’ll at least have a small gain of the transaction. Other ways to avoid repossession Avoiding repossession is a important concern for the majority of consumers. In the end, your car is probably a crucial part of the way you earn a living. Some ways to avoid repossession include reinstating the loan If you are able to get current on your past-due payments and the lender will reinstate your loan. In essence, you are bringing the situation back to square one. After reinstatement, you’ll have to continue making your regular car payment. Pay off the loan Then that paying off the entire auto loan is much easier said than done. But if this option is possible, it is one way to exit this situation. Refinancing: This can be difficult given your credit score takes a hit from missing payments. If you can locate the right loan with the lowest interest rate, or monthly payment, could be the right choice for your finances. Declare bankruptcy. If you are behind in other charges, bankruptcy may be an alternative. While there are methods to avoid bankruptcy however, it’s not a sure thing. Possession could still occur when you don’t find a workable solution. The downside to these options is that you’ll require some amount of cash to solve the problem. The main point is that if you’re facing the uneasy prospect of repossession, talk to your lender immediately. Through open communication, the lender might be able to offer a solution that is beneficial to everyone.
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Written by Contributing Writer Sarah Sharkey is a contributing writer for Bankrate. Sarah writes about a wide range of topics, such as savings tips, banking homeownership, homebuying, and personal finance. Written by Rhys Subitch Edited by Auto loans editor Rhys has been editing and writing for Bankrate since late 2021. They are committed to helping readers gain confidence to manage their finances with concise, well-studied and well-researched content that break down complex topics into digestible chunks.
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