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How to avoid repossession on a late car loan Advertiser Disclosure Advertiser Disclosure We are an independent, advertising-supported comparison service. Our aim is to assist you make smarter financial decisions by offering you interactive tools and financial calculators as well as publishing objective and original content. We also allow you to conduct research and compare data 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 Earn Profit The products that appear on this website come from companies that pay us. This compensation could affect how and when products are featured on the site, such as for instance, the sequence in which they appear within the listing categories, except where prohibited by law. This applies to our loans, mortgages, and other home lending products. However, this compensation will have no impact on the information we provide, or the reviews appear on this website. We do not contain the entire universe of businesses or financial offerings that could be available to you.
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4 min read Published April 22nd, 2022
Written by Kellye Guinan. Written by Personal and Business Finance contributor
Kellye Guinan is a freelance editor and writer who has more than 5 years experience working in the field of personal finances. She is also a full-time employee at her local library where she helps people in her community get information on financial literacy, in addition to other topics.
The edit was done 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 to take control of their finances with precise, well-researched and well-written facts that break down otherwise complicated topics into bite-sized pieces.
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Default can happen after just one late payment, but generally, auto loans will not be canceled until you cease to pay for several months that can extend to 120 days, generally. The lender is likely to send the notice of default prior to repossessing your car. In certain states, you will have the option of repaying what you owe. However, it’s not always the case. Between default and repossession There are a number of tactics to prevent your car from being taken. 6 ways to avoid repossession If your debt is in arrears or are at risk of it repossession is a possible possibility. To prevent it, you’ll need to stay in contact with the lender and work on reorganizing your financial situation. 1. Maintain contact to your lender Keep your lender up to date on your current situation, your ability to pay and general financial health. Record every conversation, including the name and the title of every person you talk to and send any letters through certified mail so you have proof that you have done your part. The lenders would prefer that their customers pay for their car loans instead of repossessing their vehicles. Make sure you have proof of your financial situation. If anything should change notify your lender know immediately. It’s important to be polite but not tense when discussing the possibility of repossession. You should avoid repossession at any cost and that’s why you should keep calling the manager until you find someone able to assist you with your loan. 2. Request a loan modification Repossession is a major risk for the lender, too. The lender will have to take over your loan, hire someone to seize the car, store it somewhere and then auction it off at auction. Due to this it is possible to request the lender for a reduction in the amount. Your lender is likely to be able to delay a few payments or restructure the term to help you make payments. Let the lender know the specifics of your situation , and then discuss the time and method by which you’ll be able to pay back. The lenders are not legally obligation to alter your loan but they could save you both a lot of the stress that repossession causes. 3. Make sure you are current on your loan If you can pay your loan in full and charges with the lender to restore the loan. This will end your default, and will be the most effective way to . It’s okay if this option isn’t available to you. For the majority of people who face repossession, getting current on the loan is not feasible. There are some methods to obtain the money — but they could cause a different pressure on your lifestyle. 4. Sell the car If your automobile loan is too high each month, you may sell your car privately . As long as you’re not in a position to be upside down on your loan (when you have more debt than you’re worth — you could move to a cheaper ride. Be sure to sell your car in a manner that will be sufficient to pay off the total sum of your loan and any fees that you owe. If you can’t, it’s best to negotiate to your lender and see if it will let you write off fees. The most important thing to remember is that selling your car may not leave you with enough of money to make a downpayment to buy another vehicle. When it’s between repossession, surrendering the car or selling the car, you’ll be left not able to travel no matter what. Selling your car helps keep your credit score intact, however it may put you in a situation like repossession. 5. Refinance your loan By extending the loan duration or decreasing the interest rate could make the automobile loan less expensive. However, if you’ve been late on multiple payments or have fallen behind, it is likely that you don’t have the credit to . However, that does not mean that you should not consider it. The credit union and the online lender, in addition to some local banks that are small, are more accommodating in their requirements. Keep in mind that applying for financing can affect your credit score, so make sure you make an application for several loans at one time to avoid multiple impacts. You may not be able lower the interest rate, but prolonging the loan time frame is an option. This can make your monthly payments less expensive. However, it means you’ll be paying more interest overall. It could be worth the higher cost to avoid repossession however it should only be done after you have exhausted all other alternatives. 6. Surrender your car You have the option of surrendering your car to your lender in the event that you are unable to pay. The lender will not have access to it , and you will have to think of alternative methods of transportation the situation, but it won’t be considered a repossession, however, your credit score will be affected. When you do the latter, your lender will undergo a similar process as repossession. It will collect and sell your car at auction. If the sale price covers what you owe, you are in the clear. If not, you’ll be held accountable for the remainder of the loan amount as well as any additional fees you’ve accumulated. The auto repossession process is carried out Once you’re in default the lender is entitled to repossess your car. Unless your state law says otherwise, repossession does not require an announcement or warning. This means you could lose your car at any point after having defaulted. If your car is repossessable, your lender might provide you with the details for the auction where the vehicle will be auctioned off. Otherwise, you may be able to reinstate your loan by catching in the overdue amount as well as any other fees associated with repossession. As with everything else in repossession the information that your lender has to provide you depends on your state. Next steps Repossession will stay visible on credit reports for a long time and make it more difficult to secure an auto loan. Be sure to keep up with every step, talking with your lender and doing what you can to avoid repossession. While not all options will be available, they are worth trying in the event of losing your vehicle. Find out more
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Written by a Personal and Business finance contributor
Kellye Guinan is a freelance editor and writer who has more than five years ‘ experience within personal finances. She is also a full-time employee at her local library, helping her community access information about financial literacy, as well as other subjects.
Edited by Rhys Subitch Edited by Auto loans editor
Rhys has been writing and editing for Bankrate since the end of 2021. They are passionate about helping readers to control their finances through providing clear, well-researched facts that break down otherwise complex topics into manageable bites.
Auto loans editor
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