Can you repay the car loan to avoid repossession? Advertiser Disclosure Advertiser Disclosure We are an independent, advertising-supported comparison service. Our aim is to assist you make better financial decisions by offering interactive financial calculators and tools as well as publishing original and objective content. We also allow you to conduct research and compare data for free to help you make sound financial decisions. Bankrate has partnerships with issuers such as, but not limited to American Express, Bank of America, Capital One, Chase, Citi and Discover. How We Make Money The products that are featured on this site come from companies who pay us. This compensation can affect the way and when products appear on this site, including, for example, the order in which they appear within the listing categories and other categories, unless prohibited by law. Our mortgage home equity, mortgage and other home loan products. This compensation, however, does not influence the information we provide, or the reviews that you see on this site. We do not cover the entire universe of businesses or financial deals that could be open to you. Srinrat Wuttichaikitcharoen/EyeEm/Getty Images
5 min read Published November 28th, 2022.
Written by Sarah Sharkey Written by Contributing Writer Sarah Sharkey is a contributing writer for Bankrate. Sarah writes about a wide range of subjects, such as banking, savings tips homeownership, homebuying, and personal finances. Edited by Rhys Subitch Edited by Auto loans Editor Rhys has been editing and writing for Bankrate since late 2021. They are passionate about helping readers gain the confidence to manage their finances through providing detailed, well-studied facts that break down complex topics into manageable bites. The Bankrate guarantee
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So, this compensation can impact how, where and in what order products appear within listing categories in the event that they are not permitted by law for our mortgage home equity, mortgage and other home lending products. Other elements, like our own proprietary website rules and whether or not a product is available within the area you reside in or is within your self-selected credit score range could also affect the way and place products are listed on this website. While we strive to provide the most diverse selection of products, Bankrate does not include specific information on each credit or financial products or services. Car repossession has increased rapidly since 2020, according to reports . If you fall behind on your payments and your vehicle could be in danger of repossession There’s good news that you have the option of taking steps to avoid this unfortunate outcome. Between reinstatement and loan modification There are a variety of options to stay clear of repossession. Does paying off a car loan end the process of repossession? Repossession rules differ based on the state you live in. In many states where repossession is allowed, the lender may take possession of the vehicle at any time you are in default. Based on the terms of the terms of your loan agreement, this could mean you have missed only one payment. There are several steps from missing a payment up to the ultimate repossession of your vehicle. Based on the situation you’re in, you can take the proper steps . If you’ve not received any notice that you’re unable to make your auto payment, you’ll be aware about that financial reality well before your lender is aware. Don’t wait for your lender to know that you don’t pay, be proactive and call the lender to explain the situation. The lender might be willing to hear you out to avoid the expense of repossession. Try to come to a reasonable solution together. For instance, you could offer more information about your situation, when you will be able to make your next payment or what you can pay right now. Depending on your history with the lender, you might be able to work out an interim reprieve or . This is especially the case when this is the first time you have been in the habit of missing a payment. When the lender has sent only notice to you, the lender may legally take possession of your vehicle with or without notice in many states. But your lender is likely to send you a notice of its plans to take possession of the vehicle prior to when it actually happens. If you are given an official notice of repossession, your first contact you must be making is with your lender. Again, an open dialogue between you and the lender may result in the resolution that stops repossession. In the meantime, waiting until you get an email means you’ll have to catch up in explaining the situation to your lender. If your lender is willing to hear your concerns, provide as many details as possible regarding when you’ll be able to pay. Additionally, let them know how much money you can put toward a loan now. In the end, it’s beneficial for the lender to work out a temporary arrangement. In the end, the company is looking to be paid, and you’ll likely require your car to get to work. Based on the lender and your past an agreement that is temporary isn’t out of the possibility. If the lender has started the process. If the lender has already started the process of repossession and you do not be able access your vehicle. At this point, reinstatement or restitution of the loan — also known as curing the defaultmay be the best possible outcome. In some states, you’ll need to pay the full past due amount. This includes any missed payments plus any late fees that accrued. Usually you will find that the lender will also ask you to cover repossession fees prior to releasing the vehicle to you. In other states, you might be required to repay the total loan to obtain your car back. This procedure is known as redemption. Not every state allows for reinstatement. If your state does not have reinstatement laws and it’s not a part of your contract, you must nevertheless contact your lender. It may be willing to alter the terms of your loan in order to incorporate it. How auto repossession works Auto repossession can be a painful experience. Understanding the process can assist you to work through it and potentially discover a solution. 1. Borrower misses payments Your lender is entitled to repossess the vehicle in the event that you become in default — and then be able to transfer the vehicle to a debt collection agency. The number of missed payments needed to be in default on your loan is determined by your state and your loan contract. In certain cases, you will only need to miss one payment in order to be in default. In other instances you may need to be late by two or three times to cause an issue. At this stage, open communication between you and your lender is vitally important. If you are able to work out an extension, now’s the perfect time to make an inquiry. 2. Lender takes your car Once you are in default the lender could or might not give you notice of its intent to repossess the vehicle. Call your lender to request a temporary payment arrangement to avoid repossession should you are sent an email. In the event of a state-wide restraining order and the state of your car, the lender may be able to repossess your car at any time , regardless of whether you’ve received a notification. 3. Lender sells the vehicle Once the lender has taken possession of your vehicle the lender may hold the car until you are caught up on the loan. The most likely scenario is that the lender will eventually sell the car. In certain states, the lender must notify you of the sale and give you the chance to re-establish your loan. If you wish to purchase the vehicle before the sale, you’ll need to pay the full amount owed and any repossession expenses. Many repossessions are sold through auction. You are entitled to attend the auction and put in a bid on your vehicle. 4. Lender will send you a bill for any deficiency After selling the vehicle The lender has to use the funds to pay what you owe. But the sale price could not cover the entire amount owed. If you owe more than what your lender gets in exchange for selling the vehicle, it’s a deficiency. Unfortunately, in many states, your lender could sue you for any deficiencies. For instance, suppose you owe $10,000 however, your lender only sells it for $7,000. In that scenario, the deficiency is $3000, and the lender may have the right to pursue you for the difference. In the event of an excess from the sale and the lender could be required to pass it on to you. This is rare however, if it does occur, you’ll probably get a little profit of the transaction. Other ways to avoid repossession Avoiding repossession is a top priority for most consumers. Since your car is probably a crucial part of the way you earn an income. A few ways to prevent repossession include: Reinstate the loan If you get current on your past-due payments then the lender will reinstate the loan. In essence, you are bringing the situation back to where it was. After reinstatement, you’ll have to keep making your regular car payment. Pay off the loan Then that paying off the whole auto loan is much easier said than done. But if this option is within reach this is a solution to avoid this. Refinancing can be difficult given your credit score takes the hit when you miss payments. If you can locate the right loan with a lower interest rate or monthly payment, could be the best option for your financial situation. Declare bankruptcy. If you’re behind in other charges If you are in debt, bankruptcy could be an option. While there are options to do so , it’s not a guarantee. Repossession can still occur if you aren’t able to come up with a viable solution. The drawback to these possibilities is that you’ll likely need to come up with some amount of cash to resolve the situation. The main point is that if you’re faced with the uneasy prospect of repossession, talk to your lender immediately. If you are able to communicate with them in a clear manner, the lender may offer a deal that works for everyone.
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Writing by Contributing Writer Sarah Sharkey is a contributing writer for Bankrate. Sarah writes about a range of topics, including savings tips, banking, homebuying, homeownership and personal finances. Edited by Rhys Subitch Edited by Auto loans editor Rhys has been editing and writing for Bankrate since late 2021. They are committed to helping readers gain the confidence to manage their finances with precise, well-studied information that breaks down otherwise complex topics into digestible chunks.
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