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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 providing you with interactive financial calculators and tools, publishing original and objective content. This allows you to conduct research and compare information for free to help you make financial decisions with confidence. Bankrate has partnerships with issuers such as, but not limited to American Express, Bank of America, Capital One, Chase, Citi and Discover. How We Earn Profit The offers that appear on this website come from companies that pay us. This compensation could affect how and where products appear on this website, for example the sequence in which they 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 products for home loans. But this compensation does not influence the information we publish, or the reviews you see on this site. We do not contain the entire universe of businesses or financial deals that may be available to you.
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4 min read Published April 22nd, 2022
Authored by Kellye Guinan. Written by Personal and business finance contributor
Kellye Guinan is a freelance editor and writer who has more than five years of experience in personal financial matters. She also works full-time as a librarian at the local library where she helps the community gain access to information on financial literacy, as well as other topics.
Edited by Rhys Subitch Edited by Auto loans editor
Rhys has been editing and writing for Bankrate from late 2021. They are dedicated to helping their readers gain the confidence to take control of their finances by providing concise, well-studied information that breaks down complicated topics into bite-sized pieces.
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Default can happen after just one late payment, but typically, auto loans won’t be charged off until you stop paying for multiple months — up to 120 days in most cases. Your lender will likely give you a notice of default prior to repossessing your vehicle. In certain states, you’ll have the chance to repay what you owe. However, it’s not always the case. Between default and repossession, there are a few strategies to stop your car to be taken. Six strategies to prevent repossession If your debt is in arrears or at threat of it repossession is a very real possibility. To prevent it, you will need to remain in close contact with your lender and work on reorganizing your financial situation. 1. Keep in touch to you lender Make sure you keep your lender current on your current situation, your ability to pay and general financial health. Record every conversation, including name and title of each person you talk to, and then send all letters via certified mail so that you can provide proof that you have done your part. Lenders would prefer to have their customers pay back their auto loans instead of repossessing their cars. Make sure you have proof of your financial situation. And if anything changes, let your lender immediately. It’s important to be polite but not tense when discussing the possibility of repossession. You should avoid repossession at any cost and that’s why you should keep calling the management line until you find someone able to help you with your loan. 2. Request for a loan modification. A repossession is a major danger for the lender and the lender, too. The lender will have to charge off your loan, hire someone to seize the car to store it elsewhere and then auction it off at auction. Because of this it is possible to approach the lender for a reduced payment. Your lender will likely be able to delay some payments or modify the terms to allow you to keep up with payments. Let you lender know the specifics of your circumstance and talk about when and how you will be able to pay back. Lenders are under no legal obligation to modify your loan but they could reduce the amount of the trouble that repossession causes. 3. Get current on the loan If you can, make up your payments and charges in order for the lender to reinstate your loan. This will stop the default process and is the most effective method of avoiding default . This is fine that this option isn’t accessible to you. For the majority of people who are facing repossession, paying off the loan is not possible. There are methods to obtain the money — such as however, it could cause a different stress on your life. 4. Sell the car if an auto loan is too high each month, you can sell your car privately . If you’re not over the limit on your loan which means you have more debt than you’re worth — you could move to a cheaper ride. Ensure that selling your car will cover the payoff amount of your loan as well as any other fees you owe. If not then, you should discuss the matter with your lender and determine if they could let you write off fees. Most importantly, selling your car may not provide you with the money to make a downpayment to buy another car. When you’re between repossession and either selling or surrendering the vehicle the car, you’ll be left in a position of no transportation, regardless of. Selling your car keeps your credit intact, but it could put you in a situation that is similar to repossession. 5. Refinance your loan By extending the loan duration or lowering your interest rate can make the auto loan less expensive. Unfortunately, if you have missed multiple payments or are in default, you probably do not have the credit . However, that isn’t a reason to not try. Online lenders and credit unions, in addition to some local banks that are small, are more accommodating in their requirements. Remember that applying for financing can also impact the credit rating of your client, therefore make sure you apply for a few loans at one time to avoid multiple attacks. It is possible that you will not be able to lower your interest rates, but extending the loan duration is a possibility. This could make your monthly payments much more affordable. However, it means you will pay more in interest overall. It might be worth the extra cost to prevent repossession however it should only be done after having exhausted other options. 6. Don’t hesitate to surrender your car the option of surrendering your car to your lender when you can’t pay. The lender will not have access to it , and will need to consider alternate options to move around however it won’t be considered repossession — although your credit score will nevertheless decrease. When you do, your lender will undergo a similar process as repossession. It will collect and auction off your car. If the sale price covers the amount you owe on your credit card, you’re covered. If not, you’ll be held responsible for the rest of the loan amount as well as any additional charges you’ve accrued. The auto repossession process works Once you are in default the lender has the right to take possession of your vehicle. Unless the law of your state says otherwise, repossession does not require notification or notice. It’s possible to lose your car anytime after you’ve defaulted. If your vehicle is taken and you are in default, your lender might provide you with the details of the auction at which the vehicle will be auctioned off. In other cases, you might be able to reinstate your loan by catching in the overdue amount, as well as any additional fees for repossession. Like every aspect of the repossession process the information that your lender has to provide you will depend on the state in which you reside. Next steps Repossession will stay in your credit file for a long time, making it that much more difficult to secure a new auto loan. Be sure to keep up with each step, talking with your lender and doing what you can to stop repossession. While not all options will be available, they are worth trying when you’re facing losing your vehicle. Learn more
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Written by Personal and business finance contributor
Kellye Guinan is a freelance editor and writer who has more than five years of experience in personal finances. She also works full-time as a worker at her local library, helping her community access information about financial literacy, in addition to other topics.
Editor: Rhys Subitch Edited by Auto loans editor
Rhys has been writing and editing for Bankrate since late 2021. They are dedicated to helping their readers gain the confidence to take control of their finances by providing clear, well-researched facts that break down complex subjects into digestible pieces.
Auto loans editor
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