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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 goal is to help you make smarter financial decisions by providing you with interactive financial calculators and tools as well as publishing objective and original content, by enabling you to conduct research and compare data for free – so that you can make financial decisions with confidence. Bankrate has partnerships with issuers including, but not limited to American Express, Bank of America, Capital One, Chase, Citi and Discover. How We Earn Money The offers that appear on this site are from companies who pay us. This compensation could affect how and when products are featured on this site, including for instance, the order in which they appear within the listing categories and other categories, unless prohibited by law. This applies to our mortgage, home equity and other home loan products. This compensation, however, does have no impact on the content we publish or the reviews you see on this site. We do not cover the entire universe of businesses or financial offers that may be accessible to you.
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4 min read published April 22 2022
Written by Kellye Guinan. Written by personal and Business Finance Contributor
Kellye Guinan is a freelance editor and writer with over five years ‘ experience within personal finances. She also works full-time as a employee at her local library, helping people in her community get information on financial literacy, in addition to other topics.
Editor: Rhys Subitch Edited by Auto loans editor
Rhys has been editing and writing for Bankrate from late 2021. They are committed to helping readers gain the confidence to manage their finances through providing concise, well-studied information that breaks down otherwise complicated subjects into digestible pieces.
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A default could occur as a result of just one missed payment, but generally, auto loans aren’t charged until you stop making payments for multiple months which can be up to 120 days typically. The lender is likely to send you notice of default before taking possession of your vehicle. In some states, you’ll be given the chance to repay what you owe, although this isn’t always the case. Between default and repossession, there are a few tactics to prevent your car in the event of repossession. Six ways to stay out of repossession If you’re in default or are at risk of it repossession is a possible possibility. To prevent it, you’ll need to keep in touch with your lender and work on reorganizing your financial situation. 1. Stay in contact to you lender Make sure you keep your lender current on your situation, ability to pay and overall financial situation. Record every interaction, including the name and the title of every person you speak to, and send any letters through certified mail so you have evidence that you have done your part. Lenders would prefer to have their customers pay back their car loans rather than repossess their cars. Be prepared to provide evidence of your financial condition. And if anything changes you need to let your lender know right away. It’s important to be polite but not tense when discussing the possibility of repossession. It is best to avoid repossession at all cost and that’s why you should keep calling the management line until you get someone to help you with your loan. 2. Request a loan modification. A repossession is a serious risk for the lender as well. The lender will have to pay off the loan and then hire a person to repossess the car then store it in a safe place and then auction it off at auction. Because of this it is possible to request the lender for a reduced payment. Your lender is likely to be able to to defer some payments or modify the term to help you keep up with payments. Inform your lender know the specifics of your circumstance and talk about when and how you will be able to repay. Lenders are under no legal obligation to alter the terms of your loan but they could reduce the amount of the trouble that repossession can cause. 3. Be current on the loan If you can meet your monthly payments and charges and ask the lender to restore your loan. This will end the default process and is the most efficient method to . It’s okay to decline this option if it isn’t available to you. For most people facing repossession, getting current on the loan is not possible. There are some ways to get the money — such as — but it may create a different kind of pressure on your lifestyle. 4. Sell the car If your auto loan is too much each month, you can sell your car privately . If you’re not in a position to be upside-down on your loan which means you owe more than it’s worth — you could change to a less expensive vehicle. Make sure that the sale of your car will pay for the sum of your loan and any charges you have to pay. If not then, you should discuss the matter to your lender and determine if they will let you write off the fees. Most importantly, selling your car may not provide you with the an amount to pay for another vehicle. When you’re between repossession and selling the vehicle or surrendering it the car, you’ll be left without transportation no matter what. Selling your car keeps your credit score intact, however it can cause you to be in a position that is similar to repossession. 5. Refinance your loan Extending your loan duration or lowering the interest rate could make an automobile loan more affordable. Unfortunately, if you have fallen behind on payments, or have fallen behind, you probably do not have the credit . However, that doesn’t mean you shouldn’t try. Credit unions and online lenders, as well as smaller local banks offer more flexibility in terms of requirements. Keep in mind that applying for financing could also impact the credit rating of your client, therefore be sure that you apply for a few loans at one time to avoid multiple attacks. You may not be able to reduce your interest rate but extending your loan duration is a possibility. This could allow your monthly installments to be more affordable. But it does mean you’ll be paying more in interest overall. It might be worth the extra cost to avoid repossession however, it should be done after having exhausted all other alternatives. 6. Surrender your car You have the option to voluntarily surrender your vehicle to your lender when you’re unable to pay. You won’t have access to it , and will need to consider alternate methods of transportation, but it won’t count as repossession — although your credit score will be affected. When you do, your lender will go through similar procedures to 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 responsible for the rest of the loan amount and any charges you’ve accrued. The auto repossession process works Once you are in default the lender is entitled to seize your car. Unless your state law says that it is not required, repossessions don’t require an announcement or warning. It’s possible to lose your car at any point after having defaulted. If your vehicle is taken or seized, your lender could provide you with information for the auction where your vehicle will be sold. Otherwise, you may be able to renew your loan by being able to catch over the outstanding amount and any fees for repossession. Similar to every aspect of the repossession process, the information the lender must provide you depends on your state. The next steps Repossession remains in your credit file for years, making it that much difficult to obtain a new auto loan. Be sure to keep up with each step communicating with your lender and doing what you can to stop repossession. Although not every alternative is available but they’re worth a try in the event of losing your vehicle. Learn more
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Written by Business and personal finance contributor
Kellye Guinan is a freelance editor and writer with more than five years ‘ experience within personal finance. She’s also a full-time worker at her local library, where she assists her community access information about financial literacy, as well as other topics.
The edit was done by Rhys Subitch Edited by Auto loans editor
Rhys has been editing and writing for Bankrate since the end of 2021. They are dedicated to helping their readers feel confident to take control of their finances by providing concise, well-researched and well-informed data that breaks otherwise complex topics into manageable bites.
Auto loans editor
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