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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 better financial decisions by offering you interactive financial calculators and tools, publishing original and objective content. This allows you to conduct research and compare data for free and help you make sound financial decisions. Bankrate has agreements with issuers such as, but not restricted to, American Express, Bank of America, Capital One, Chase, Citi and Discover. How We Earn Money The offers that appear on this website come from companies who pay us. This compensation could affect how and when products are featured on this website, for example, for example, the sequence in which they be listed within the categories of listing in the event that they are not permitted by law for our mortgage, home equity and other products for home loans. However, this compensation will not influence the content we publish or the reviews that you read on this site. We do not include the vast array of companies or financial offerings that could be available to you.
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4 minutes read. Published April 22nd 2022
Writer: Kellye Guinan Written by Personal and Business Finance contributor
Kellye Guinan is a freelance editor and writer who has 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, 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 the end of 2021. They are passionate about helping readers to manage their finances by providing precise, well-researched and well-written facts that break down otherwise complicated subjects into digestible pieces.
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A default could occur as a result of just one missed payment, but in most cases, auto loans will not be canceled until you stop paying for multiple months — up to 120 days in most cases. The lender will likely give you a notice of default prior to taking possession of your vehicle. In some states, you’ll have the option of repaying what you owe. However, this may not be the case in all states. Between default and repossession there are several strategies to stop your car in the event of repossession. 6 ways to avoid repossession If your debt is in arrears or at threat of it repossession is a very real possibility. To stay out of it, you’ll have to stay in contact with the lender and work on reorganizing your financial situation. 1. Stay in contact to the lender Keep your lender current on your current situation, your ability to make payments and overall financial situation. Record every conversation, including name and title of each person you speak to, and send any letters through certified mail so that you can provide evidence of your efforts. They would rather have their customers pay for their auto loans rather than repossess their vehicles. Be prepared to provide proof of your financial situation. If something changes you need to let your lender know right away. It is important to be courteous but not tense when discussing the possibility of repossession. It is best to avoid repossession at all cost, so keep asking up the manager until you get someone to assist you in obtaining your loan. 2. Request for a loan modification. Repossession is a major chance for the lender and the lender, too. They will need to take over your loan or hire someone to seize the car, store it somewhere and then sell it at auction. Due to this it could be beneficial to approach the lender for a reduction in the amount. Your lender will likely be able to to defer some payments or modify the loan to help you pay your bills. Inform your lender know the specifics of your situation and discuss the time and method by which you’ll be able to make repayments. The lender is not under any legal obligation to modify the terms of your loan, but it might help you and your lender avoid a lot of the stress that repossession causes. 3. Be current on the loan If you are able meet your monthly payments and charges with the lender to get the loan. This will stop the default process and is the most effective way to . It’s okay that this option isn’t accessible to you. For the majority of people who are facing repossession, obtaining a current payment on the loan is not feasible. There are options to access the money — such as — but it may cause a different pressure on your lifestyle. 4. Sell the car if an auto loan is too high every month, you could sell your vehicle privately or . If you’re not upside down on your loan which means you are owing more than what it’s worth, you may be able to change to a less expensive ride. Be sure to sell your car in a manner that will cover the payoff sum of your loan and any fees you owe. If you can’t then, you should discuss the matter with your lender and see if they could allow you to write off the fees. Most importantly, selling your car won’t provide you with the an amount to pay for another car. When you’re between repossession and surrendering the car or selling your car, you’ll be not able to travel no matter what. Selling your car keeps your credit score intact, however it can result in a situation like repossession. 5. Refinance your loan Extending your loan duration or lowering the interest rate could help make the automobile loan less expensive. Unfortunately, if you have been late on multiple payments or are in default, it is likely that you do not have the credit . However, that does not mean that you should not attempt. Credit unions and online lenders, in addition to smaller local banks have more flexible requirements. Be aware that applying for financing can negatively impact your credit score, so be sure that you make an application for several loans simultaneously to prevent multiple hits. It is possible that you will not be able to lower your interest rates, but extending your loan term is a possibility. This could make your monthly payments much more affordable. But it does mean you’ll be paying more interest in the long run. It could be worth the extra cost to prevent repossession, but it should be done after you have exhausted other alternatives. 6. Give up your car the option of surrendering your vehicle to your lender when you can’t pay. You won’t have access to it , and must consider alternative ways to get around, but it will not be considered a repossession, but your credit score may 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 price of the sale is greater than what you owe, you’re in good shape. If not, you’ll be responsible for the remaining loan amount as well as any additional fees you’ve accumulated. How the auto repossession process works Once you are in default, your lender is entitled to repossess your car. If your state’s law states otherwise, repossession doesn’t need notice or warning. That means that you can lose your car anytime after you’ve defaulted. If your car is repossessed, your lender may give you details for the auction where your car will be sold. Otherwise, you may be able of reestablishing your loan by being able to catch up on the past-due amount as well as any other fees associated with repossession. Like all aspects of the repossession process the information that your lender has to provide you depends on your state. Next steps Repossession will stay on your credit report for years and make it more difficult to secure an auto loan. Focus on keeping up with every step communicating with the lender and doing everything you can to prevent repossession. Although not every alternative will be available to you however, these are options worth considering when you’re facing losing your vehicle. Find out more
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Written by Business and personal finance Contributor
Kellye Guinan is a freelance editor and writer who has more than 5 years experience working in the field of personal financial matters. She is also a full-time employee at her local library, where she assists people in her community get information about financial literacy, in addition to other topics.
Edited by Rhys Subitch Edited by Auto loans editor
Rhys has been editing and writing for Bankrate since late 2021. They are dedicated to helping their readers gain the confidence to control their finances through providing concise, well-researched and well-informed facts that break down complicated topics into bite-sized pieces.
Auto loans editor
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