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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 choices by providing you with interactive financial calculators and tools that provide objective and unique content. This allows you to conduct research and compare information for free and help you make informed financial decisions. Bankrate has partnerships with issuers, including but not restricted to, American Express, Bank of America, Capital One, Chase, Citi and Discover. How We Earn Money The products that appear on this website come from companies that compensate us. This compensation may impact how and when products are featured on this site, including, for example, the order in which they may appear within the listing categories and other categories, unless prohibited by law. Our loan products, such as mortgages and home equity, and other home lending products. However, this compensation will not influence the information we publish, or the reviews you read on this site. We do not contain the universe of companies or financial offers that may be open to you.
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4 min read published April 22nd 2022
Written 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 finance. She’s also a full-time worker at her 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 since the end of 2021. They are committed to helping readers gain the confidence to manage their finances with precise, well-researched and well-written information that breaks down complex topics into manageable bites.
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The default can occur after one missed payment, however generally it’s not a problem. Auto loans aren’t charged until you stop paying for a period of time — up to 120 days, generally. Your lender is likely to send you notice of default before taking possession of your vehicle. In certain states, you’ll be given the option of repaying what you owe. However, this may not be the case in all states. Between default and repossession there are several ways to avoid your vehicle in the event of repossession. 6 ways to avoid repossession If you’re in default or are at threat of it repossession is a very real possibility. To prevent it, you’ll have to stay in contact to your lender and work on reorganizing your financial situation. 1. Maintain contact and keep in contact with you lender Keep your lender current on your current situation, your ability to pay and overall finances. Document every conversation, including name and the title of every person you talk to and send any letters through certified mail so that you can provide proof the efforts you’ve made. Lenders would prefer to have their customers pay for their auto loans instead of repossessing their vehicles. Be prepared to provide evidence of your financial condition. If anything should change you need to let your lender know immediately. It pays to be polite but and firm when discussing the possibility of repossession. You want to avoid it at all costs and that’s why you should keep calling the management line until you can find someone to assist you with your loan. 2. Request for a loan modification. A repossession is a significant risk for the lender, too. They will need to charge off the loan or hire someone to take possession of the vehicle, store it somewhere and then auction it off at auction. Because of this it is possible to ask the lender to make a lower payment. Your lender will likely 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 circumstance and talk about the time and method by which you’ll be able to repay. The lenders are not legally obligation to alter your loan, but it might reduce the amount of the trouble that repossession poses. 3. Make sure you are current on your loan If you can pay your loan in full and charges and ask the lender to reinstate the loan. This will end the default process and is the most effective method of avoiding default . It’s okay to decline this option if it isn’t available to you. For most people facing repossession, getting current on the loan is not possible. There are options to access the cash — like — but it may create a different kind of pressure on your lifestyle. 4. Sell the car if an auto loan is too expensive each month, you may sell your car privately or . Provided you aren’t in a position to be upside-down on your loan which means you are owing more than what it’s worth — you could switch to a more affordable car. Ensure that selling your car will cover the payoff amount of your loan as well as any other charges you have to pay. If you aren’t able to do that, try negotiating to your lender and determine if they could allow you to write off the fees. In the end, selling your car won’t provide you with the an amount to pay for another car. If you are in between repossession, surrendering the car or selling the car, you’ll be left without transportation no matter what. Selling your car helps keep your credit in good standing, but it can put you in a situation like repossession. 5. Refinance your loan Extending your loan duration or lowering the interest rate could help make the auto loan more affordable. However, if you’ve missed multiple payments or are in default, it is likely that you aren’t in a position to get the credit you need . However, that isn’t a reason to not try. Online lenders and credit unions, as well as smaller local banks have more flexible requirements. Be aware that applying for financing could also impact the credit rating of your client, therefore be sure you apply for a few loans simultaneously to prevent multiple impacts. You might not be able to reduce the interest rate, but prolonging the loan duration is a possibility. This can make your monthly payments more affordable. However, it means you’ll pay more interest overall. It may be worth the extra cost to avoid repossession however it should only be done after having exhausted other alternatives. 6. Give up your car the option of surrendering the car to your lender in the event that you are unable to pay. You won’t have access to it , and will need to consider alternate options to move around however it won’t be considered a repossession, but your credit score may still decrease. When you do the latter, your lender will undergo the same process as repossession. They will take over and then sell your vehicle at auction. If the purchase price is more than what you owe, you’re covered. If not, you’ll be responsible for the remaining loan amount and any fees you’ve accumulated. The auto repossession process operates Once you’re in default and your lender has the right to repossess your car. Unless the law of your state says that it is not required, repossessions don’t require notice or warning. It’s possible to lose your vehicle at any point after having defaulted. If your car is repossessed, your lender may give you details of the auction at which the vehicle will be auctioned off. If not, you might be able to reinstate your loan by being able to catch in the overdue amount as well as any other fees associated with repossession. Like all aspects of the repossession process the information that your lender is required to give you is contingent on your state. The next step Repossession remains 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 communicating with the lender and doing all you can to avoid repossession. While not all options will be available but they’re worth a try when you are up against losing your vehicle. Learn 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 finances. She is also a full-time worker at her local library, where she assists her community access information about financial literacy, as well as other subjects.
The edit was done 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 feel confident to take control of their finances through providing concise, well-researched and well-informed data that breaks otherwise complex topics into manageable bites.
Auto loans editor
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