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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 choices by offering you interactive tools and financial calculators as well as publishing objective and original content. This allows you to conduct research and compare data for free and help you make informed 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 Earn Profit The products that appear on this website are provided by companies who pay us. This compensation may impact how and when products are featured on this site, including, for example, the order in which they may be listed within the categories of listing in the event that they are not permitted by law for our loan products, such as mortgages and home equity, and other home loan products. However, this compensation will have no impact on the information we publish, or the reviews you see on this site. We do not contain the universe of companies or financial offers that may be accessible to you.
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4 minutes read. Published April 22, 2022
Authored by Kellye Guinan Written by Personal and Business Finance contributor
Kellye Guinan is a freelance editor and writer with more than five years of experience in personal financial matters. She’s also a full-time librarian at the local library, helping people in her community get information on financial literacy, among other topics.
Editor: Rhys Subitch Edited by Auto loans editor
Rhys has been editing and writing for Bankrate since late 2021. They are committed to helping readers feel confident to control their finances by providing clear, well-researched facts that break down complicated subjects into digestible pieces.
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The default can occur after one missed payment, however generally, auto loans aren’t charged until you cease to pay for multiple months — up to 120 days, generally. Your lender is likely to send you a notice of default prior to taking possession of your vehicle. In certain states, you’ll have the option of repaying the amount you owe, but it’s not always the case. Between default and repossession, there are a few ways to avoid your vehicle from being taken. 6 ways to avoid repossession If you’re currently in default, or at risk of it repossession is a very real possibility. To stay out of it, you’ll need to keep in touch with the lender and restructure your finances. 1. Maintain contact to the lender Keep your lender up to date regarding your financial situation, capacity to pay and overall finances. Document every conversation, including the name and title of each person you talk to and then send all letters via certified mail so you have proof of your efforts. Lenders would prefer to have their customers pay back their auto loans rather than repossess their vehicles. Prepare to submit documentation about your financial state. If anything should change you need to let your lender know right away. It’s important to be polite but and firm when discussing the possibility of repossession. It is best to avoid repossession at all costs, so keep asking up the management line until you get someone to assist you with your loan. 2. Request a loan modification Repossession is a major danger for the lender, too. The lender will have to charge off the loan and then hire a person to seize the car then store it in a safe place and then sell it at auction. Because of this, it may be effective to request the lender to make a lower payment. Your lender is likely to be able to defer a few payments or restructure the terms to allow you to pay your bills. Let you lender know the specifics of your situation and discuss when and how you will be able to make repayments. The lenders are not legally obligation to alter the terms of your loan, but it might reduce the amount of the stress that repossession can cause. 3. Get current on the loan If you can pay your loan in full and charges in order for the lender to get your loan. This will stop 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, paying off the loan isn’t possible. There are a few options to access the cash — like — but it may create a different kind of stress on your life. 4. Sell the car If your auto loan is too high each month, you can sell your car privately . As long as you’re not in a position to be upside down on your loan — when you are owing more than what it’s worth — you could switch to a more affordable ride. Ensure that selling your car will cover the payoff amount of your loan and any charges you have to pay. If not do that, try negotiating with your lender and see if it could let you reduce fees. In the end, selling your car might not leave you with enough of money to make a downpayment to buy another vehicle. If you are in between repossession, either selling or surrendering the vehicle the car, you’ll be left not able to travel no matter what. Selling your car keeps your credit intact, but it can put you in a situation that is similar to repossession. 5. Refinance your loan The extension of your loan duration or decreasing the rate of interest can make your automobile loan cheaper. However, if you’ve fallen behind on payments, or are in default, it is likely that you do not have the credit . However, that doesn’t mean you shouldn’t attempt. Online lenders and credit unions, along with smaller local banks offer more flexibility in terms of requirements. Remember that applying for financing could negatively impact your score on credit, which is why make sure that you apply for several loans at once to prevent multiple attacks. It is possible that you will not be able to reduce your interest rates, but extending the loan term is a possibility. This could make your monthly payments more affordable. But it does mean you’ll be paying more in interest overall. It could be worth the extra cost to prevent repossession however it should only be done after having exhausted all other alternatives. 6. Don’t hesitate to surrender your car the option to voluntarily surrender your car to your lender when you can’t pay. The lender will not be able to access it and must consider alternative options to move around, but it won’t be considered a repossession, however, your credit score will be affected. If you do this it, your lender will go through the same process as repossession. They will then take possession of and auction off your car. If the price of the sale is greater than what you owe, you’re covered. If not, you will be held responsible for the rest of the loan amount and any charges you’ve accrued. How the auto repossession process works Once you are in default and your lender has every right to seize your car. Unless the law of your state says otherwise, repossession does not require notice or warning. This means you could lose your vehicle at any time once you’ve defaulted. If your car is repossessed and you are in default, your lender may give you details of the auction at which your vehicle will be sold. If not, you might be able to reinstate your loan by being able to catch in the overdue amount and any fees for repossession. Like every aspect of repossession, the information your lender must provide you depends on your state. Next steps Repossession will remain in your credit file for years, making it that much harder to get a new auto loan. Make sure you are on top of every step of the process and contacting your lender and doing what 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 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 five years of experience in personal finance. She’s also a full-time worker at her local library, where she assists people in her community get information about financial literacy, in addition to other topics.
The edit was done by Rhys Subitch Edited by Auto loans editor
Rhys has been writing and editing for Bankrate since the end of 2021. They are committed to helping readers gain the confidence to control their finances through providing clear, well-researched information that breaks down otherwise complex subjects into digestible pieces.
Auto loans editor
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