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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 mission is to help you make better financial decisions by offering you interactive financial calculators and tools as well as publishing objective and original content. This allows you to conduct your own research and compare data for free and help you make sound financial decisions. Bankrate has partnerships with issuers such as, but not restricted to, American Express, Bank of America, Capital One, Chase, Citi and Discover. How We Make Money The products that appear on this website come from companies who pay us. This compensation could affect how and when products are featured on the site, such as the order in which they may be listed within the categories of listing in the event that they are not permitted by law. This applies to our mortgage, home equity, and other home lending products. But this compensation does affect the information we publish, or the reviews that you see on this site. We do not cover the entire universe of businesses or financial offerings that could be available to you.
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4 minutes 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 of experience in personal finance. She is also a full-time worker at her local library, helping people in her community get information on financial literacy, as well as other topics.
Edited by Rhys Subitch Edited by Auto loans editor
Rhys has been writing and editing for Bankrate from late 2021. They are dedicated to helping their readers feel confident to take control of their finances with precise, well-researched and well-written data that digests otherwise complicated subjects into digestible pieces.
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The default can occur after one missed payment, but typically the auto loans won’t be charged off until you cease to pay for multiple months which can be up to 120 days typically. Your lender will likely send you a notice of default prior to repossessing your vehicle. In certain states, you’ll be given the chance to repay what you owe. However, this isn’t always the case. Between repossession and default, there are a few strategies to stop your car to be taken. Six ways to stay out of repossession If your debt is in arrears or at the risk of being in default repossession is a very real 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 the lender Keep your lender current on your current situation, your ability to pay and overall financial situation. Record every conversation, including the names and titles of every person you talk to and send any letters through certified mail so that you can provide evidence the efforts you’ve made. The lenders would prefer that their customers pay back their auto loans rather than repossess their cars. Prepare to submit documentation about your financial state. And if anything changes, let your lender immediately. It pays to be polite but and firm when discussing the possibility of repossession. You should avoid repossession at all cost and that’s why you should keep calling the management line until you find someone able to assist you with your loan. 2. Request for a loan modification Repossession is a major risk for the lender, too. They will need to charge off the loan or hire someone to seize the car then store it in a safe place and then auction it off at auction. In this case, it may be effective to ask the lender for a reduced payment. Your lender may be able to to defer the payment for a couple of months or change the loan to help you make payments. Make sure to let the lender know the details of your situation , and then discuss the time and method by which you’ll be able to pay back. Lenders are under no legal obligation to alter the terms of your loan, but it might save you both a lot of the stress that repossession poses. 3. Be current on the loan If you are able to pay your loan in full and charges with the lender to reinstate the loan. This will end in the process of default and it is an effective method of avoiding default . It’s okay if this option isn’t available to you. For the majority of people who are facing repossession, obtaining a current payment on the loan is not feasible. There are some ways to get the money however, it could cause a different strain on your life. 4. Sell the car if an automobile loan is too much each month, you may sell your car privately . If you’re not over the limit on your loan (when you owe more than it’s worth — you could move to a cheaper car. Ensure that selling your car will cover the payoff portion of the loan as well as any other fees you owe. If you aren’t able to, it’s best to negotiate with your lender and see if it might allow you to write off the fees. Most importantly, selling your car might not provide you with the an amount to pay for another vehicle. If you are in between repossession, either selling or surrendering the vehicle 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 the loan term or lowering the rate of interest can help make the automobile loan cheaper. Unfortunately, if you have fallen behind on payments, or have fallen behind, you probably do not have the credit . That does not mean that you should not try. Online lenders and credit unions, in addition to some small local banks, offer more flexibility in terms of requirements. Remember that applying for financing could also impact the credit rating of your client, therefore be sure you apply for several loans at once to avoid multiple hits. It is possible that you will not be able lower your interest rates, but extending your loan term is a possibility. This can help make your monthly payments much more affordable. However, this means that you’ll be paying more interest overall. It could be worth the higher cost to prevent repossession however, it should be done only after you’ve exhausted all other alternatives. 6. Give up your car the option of surrendering your vehicle to your lender in the event that you are unable to pay. You will no longer have access to it , and will need to consider alternate ways to get around the situation, but it won’t be considered repossession — but your credit score may nevertheless decrease. If you do this the latter, your lender will undergo the same process as repossession. They will then take possession of and sell your vehicle at auction. If the purchase price is more than the amount you owe, then you are in the clear. If not, you’ll be responsible for the remaining loan amount, as well as any fees you’ve accumulated. What happens when you default on your auto repossession works Once you are in default and your lender has every right to seize your car. Unless the law of your state says that it is not required, repossessions don’t require notice or warning. That means that you can lose your car anytime after you’ve defaulted. If your car is repossessed, your lender could provide you with information of the auction at which your vehicle will be sold. If not, you might be able to reinstate your loan by getting caught up on the past-due amount, as well as any additional fees for repossession. Like everything else in repossession the details the lender is required to give you is contingent on your state. The next steps Repossession will remain visible on credit reports for years and make it difficult to obtain an auto loan. Focus on keeping up with every step of the process communicating with your lender and doing all you can to prevent repossession. Although not every alternative will be available however, these are options worth considering when you are up against losing your car. Find out more
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Written by Personal and business finance Contributor
Kellye Guinan is a freelance editor and writer with over 5 years experience working in the field of personal finance. She is also a full-time librarian at the local library, helping 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 from late 2021. They are committed to helping readers gain the confidence to take control of their finances with precise, well-studied information that breaks down complicated topics into bite-sized pieces.
Auto loans editor
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