Are you able to pay off the car loan in order to avoid repossession? Advertiser Disclosure Advertiser Disclosure We are an independent, advertising-supported comparison service. Our mission is to help you make better financial choices by providing you with interactive financial calculators and tools that provide objective and original content. This allows you to conduct research and compare information at no cost – so that you can make sound 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 are featured on this website are provided by companies that compensate us. This compensation could affect how and when products appear on the site, such as, for example, the sequence in which they be listed within the categories of listing and other categories, unless prohibited by law. Our mortgage or home equity products, as well as other products for home loans. However, this compensation will have no impact on the information we provide, or the reviews that you see on this site. We do not include the entire universe of businesses or financial deals that could be accessible to you. Srinrat Wuttichaikitcharoen/EyeEm/Getty Images
5 min read Published November 28, 2022
Sarah Sharkey Written Sarah Sharkey Written by Contributing Writer Sarah Sharkey is a contributing writer for Bankrate. Sarah writes about a wide range of subjects, including banking, savings tips, homebuying, homeownership and personal financial matters. Written by Rhys Subitch Edited by Auto loans Editor Rhys has been writing and editing for Bankrate since the end of 2021. They are dedicated to helping readers gain the confidence to control their finances by providing concise, well-researched and precise information that breaks down otherwise complex subjects into digestible pieces. The Bankrate guarantee
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So, this compensation can affect the way, location and when products are displayed within the categories of listing in the event that they are not permitted by law. We also offer mortgage, home equity and other home loan products. Other factors, like our own proprietary website rules and whether a product is available within your area or at your self-selected credit score range could also affect how and where products appear on this site. While we strive to provide an array of offers, Bankrate does not include information about every financial or credit item or product. The number of repossessions on cars has grown dramatically from 2020, according to reports . If you’re in debt on your payments and your vehicle is in danger of being taken away, the good news is that you can take action to avoid this unfortunate outcome. From reinstatement to loan modification you have a number of opportunities to prevent repossession. Does paying off a car loan stop the repossession process? The rules of repossession vary depending on the state in which you reside. In the majority of states there is a possibility that the lender is able to take the vehicle at any time you are in default. Based on the terms of your loan agreement, that could mean you have missed only one payment. There are a variety of steps to take between the time you miss a payment and the ultimate repossession of your vehicle. Based on your current situation you should take the proper steps . If you’ve not received any notice If you are unable to make your car payment, you’ll likely know about this financial fact before your lender will. Do not wait around for the lender to know that you fail to pay take the initiative and contact the lender to explain your situation. The lender might be willing to listen to you in order to avoid the expense of repossession. Make an effort to find an acceptable solution. For example, you could provide more details about your situation, including when you’ll be able to make the next payment , or the amount you’re able to pay now. Depending on your history with the lender it is possible that you will be able to negotiate some sort of temporary reprieve, or . This is particularly true in the case of this being the first time you’ve been in the habit of missing a payment. In the event that your lender has not sent notice to you, the lender is legally able to repossess your vehicle with or without notice in a variety of states. But your lender will likely mail you a notice about its intention to take possession of the vehicle prior to when it actually occurs. If you receive a notice of repossession, the first phone call you need to make is to your lender. A clear channel of communication between you and your lender can lead to the resolution that stops repossession. If you wait until you receive a notice means that you’ll have to catch up when you explain the situation to your lender. If the lender is willing to hear you out, offer as many details as possible regarding when you’ll be able to make a payment. Also volunteer how much you can put toward a loan today. In the end, it’s advantageous for the lender to negotiate a temporary arrangement. In the end, the company wants to get paid, and you’ll likely require your vehicle to go to work. Depending upon the lender and your history it is not out of the realm of possibility. In the event that your lender has already begun the process, if it is the case that the lender has already begun the process of repossession, you may not be able to access your vehicle. At this point, reinstatement to your loan or loan modification known as curing the default -may be the best alternative. In some states, you’ll be required to pay the full past due amount. This includes any missed payments along with any late fees which have accrued. Usually the lender will also require you to pay repossession charges before releasing the vehicle to you. In some states, you might be required to repay the entire loan to get your car back. This procedure is known as redemption. Not every state allows for reinstatement. If your state doesn’t have reinstatement laws and it’s not included in your contract, you should nevertheless contact your lender. It might be willing to alter the terms of your loan so that it includes it. How auto repossession works Auto repossession is an unpleasant experience. However, understanding the process will aid you in navigating it and eventually find an answer. 1. When a borrower is late on payments, the lender is entitled to repossess the vehicle in the event that you become in default, and also to send it be able to transfer the vehicle to a debt collection agency. The exact number of missed payments required to default on your loan is determined by your state and your loan contract. In certain situations, you will only need make one missed payment in order to fall into default. In other cases it is possible to be late by two or three times to cause an issue. In this situation, clear contact between you and your lender is crucial. If it’s possible to work out an extension, now’s the right time to inquire. 2. Lender repossess your car once in default, your lender may or not send you a notice of its intention to repossess the car. Contact your lender to request an arrangement for a short-term payment to avoid repossession if you get an email. In the event of a state-wide restraining order and the state of your car, the lender might be able repossess your car at any time , regardless of whether or not you’ve received notice. 3. Lender sells the car once the lender has taken possession of the vehicle It could keep the car until you are caught up on your loan. But the more likely outcome would be the lender will eventually sell the car. In certain states the lender will notify you about the sale and provide you the chance to re-establish your loan. If you want to buy the vehicle back prior to the sale, you’ll need to pay for the entire amount due and any repossession expenses. Many repossessions are sold through auction. It is your right to attend the auction and put in a bid on your vehicle. 4. Lender will send you a bill for any outstanding balance. After you sell the car The lender must use those funds to pay what you have to pay. However, the amount you paid for the vehicle may not cover the entire amount owed. If you have more debt than your lender receives for selling the vehicle, it’s a deficit. Unfortunately, in many states the lender can claim any deficiency. Let’s say for instance you owe $10,000 however, your lender only sells it for $7,000. In that scenario the deficit is $3,000, and the lender could be able to sue you for the difference. In the event of surplus to the sale and the lender might be required to transfer it to you. This is rare but should it happen, you will at least have a small profit by selling the property. Another method to avoid repossession is to use the following strategies. Refusing repossession is a major concern for many borrowers. After all, your vehicle is likely to be a major component of your ability to earn money. There are a few options to avoid repossession include: Reinstate the loan If you are able to be current with your past due payments and the lender will allow you to reinstate the loan. Essentially, that means you are bringing the situation back to the beginning. After reinstatement, you’ll have to keep making your usual car payments. Take care to pay off the loan Naturally the process of paying off your entire auto loan is much easier to say than do. However, if this is possible this is a option to get out of this. Refinancing can be difficult as your credit score takes the hit when you miss payments. However, if you are able to find a new loan with the lowest interest rate, or the monthly installment, it could be the right move for your financial situation. Declare bankruptcy. If you’re in debt on other bills, bankruptcy may be an option. While there are methods to avoid bankruptcy however, it’s not a sure thing. Repossession can still occur in the event that you fail to find a workable solution. The downside to these possibilities is that you’ll probably have to raise some amount of cash to resolve the situation. The main point is that if you’re faced with the uncomfortable possibility of repossession contact your lender immediately. Through open communication and open lines of communication, the lender might be able to offer a solution that is beneficial to everyone.
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Writing by Contributing Writer Sarah Sharkey is a contributing writer for Bankrate. Sarah writes on a variety of topics, such as banking, savings tips, homebuying, homeownership and personal finance. Written by Rhys Subitch Edited by Auto loans editor Rhys has been writing and editing for Bankrate from late 2021. They are passionate about helping readers gain the confidence to control their finances with precise, well-studied information that breaks down complicated topics into manageable bites.
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