Can you pay off a car loan so that you don’t have to repossess it? Advertiser Disclosure Advertiser Disclosure We are an independent, advertising-supported comparison service. Our goal is to help you make better financial choices by providing you with interactive tools and financial calculators as well as publishing original and objective content. This allows users to conduct research and compare data for free to help you make informed 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 are from companies that pay us. This compensation could affect how and where products appear on the site, such as for instance, the order in which they appear within the listing categories, except where prohibited by law for our mortgage, home equity and other products for home loans. But this compensation does have no impact on the information we provide, or the reviews you see on this site. We do not contain the universe of companies or financial deals that could be accessible to you. Srinrat Wuttichaikitcharoen/EyeEm/Getty Images

5 minutes 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 range of subjects, including banking, savings tips homeownership, homebuying, and personal financial matters. Written by Rhys Subitch Editored By Auto loans editor Rhys has been editing and writing for Bankrate since late 2021. They are passionate about helping readers gain confidence to control their finances by providing clear, well-researched information that breaks down otherwise complex topics into manageable bites. The Bankrate promise

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Therefore, this compensation may impact how, where and in what order products appear within listing categories, except where prohibited by law for our mortgage, home equity and other products for home loans. Other factors, such as our own website rules and whether or not a product is available in your region or within your self-selected credit score range can also impact the manner in which products appear on this site. We strive to provide an array of offers, Bankrate does not include details about every credit or financial product or service. Repossessions of cars have increased dramatically from 2020, according to reports . If you are in arrears with your payments and your vehicle is in danger of being taken away, the good news is that you can take action to stop this unfortunate conclusion. In between reinstatement as well as loan modification you have a number of opportunities to stay clear of repossession. Do paying off a vehicle loan prevent repossession? The rules for repossession differ according to the state that you reside in. In many states there is a possibility that the lender may take possession of the vehicle as soon as you are in default. Based on the terms of your loan agreement, this could mean you have missed only one payment. There are many steps from missing a payment up to the eventual repossession of your vehicle. Based on the current circumstances you should take the appropriate steps . If you’ve not received any notification that you’re unable to make your auto payment, you’ll likely know about this financial fact before your lender does. Do not wait around for the lender to find out when you miss a payment, be proactive and call the lender to explain the situation. The lender may be willing to listen to you in order to save the cost of repossession. You should try to reach an agreeable solution. For instance, you could give more details regarding your circumstances, such as when you can 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 if this is the first time that you’ve had to make a missed payment. In the event that your lender has only sent notice, a lender may legally take possession of your car with or without notice in a variety of states. But your lender will likely send you a notice of its plans to repossess your vehicle before it happens. If you receive a notice of repossession, your first contact you must contact your lender. A clear channel of communication between you and your lender could lead to an option that prevents repossession. In the meantime, waiting until you get a notice means that you’ll be playing catch-up in explaining the situation with your lender. If your lender is willing to hear your concerns, provide as much information as you can about when you can pay. Also volunteer how much you have available to put to make a payment today. It is beneficial for the lender to negotiate an arrangement that is temporary. After all, the business wants to get paid, and you’ll probably need your car to get to work. Dependent your lender and your past an agreement that is temporary is within the possibility. When the lender has already begun the process If the lender has already begun the repossession process, you may not have access to your vehicle. In this instance, the reinstatement to your loan — also known as resolving the defaultis a possible outcome. In certain states, you’ll be required to pay the full past due amount. That includes every missed payment and any late fees which have accrued. Typically the lender may also require you to pay repossession charges before releasing the vehicle to you. In some states, you could be required to repay the entire loan to get your car back — that process is called redemption. Not every state allows for reinstatement. If your state doesn’t have reinstatement laws and it’s not a part of the contract, it’s best to still reach out to your lender. It might be willing to modify the terms of your loan in order to incorporate it. How auto repossession works repossession can be a painful experience. Understanding the process can aid you in navigating it, and possibly discover an answer. 1. If a borrower fails to pay, your lender has the right to take possession of the vehicle when you’re in default, and also to send it to a debt collection agency. The number of missed payments that are required to default on your loan will depend on the state you live in as well as your loan contract. In certain situations it is only necessary make one missed payment to be in default. In other instances it is possible to miss two or three payments to cause an issue. At this stage, open dialogue between you and your lender is vitally important. If you are able to work out a reprieve, now is the right time to inquire. 2. Lender repossess your car once you’re in default Your lender could or might not notify you of its intention to take possession of the vehicle. Contact your lender to ask for a temporary payment arrangement to avoid repossession in the event that you get an official notice. Based on the state you live in the lender could be able to take possession of your vehicle anytime — regardless of whether or not you’ve received notice. 3. Lender sells the vehicle once the lender is in possession of your vehicle, it could hold onto the car until you are caught up on the loan. However, the most likely outcome will be that the lender will sell the vehicle. In several states the lender will notify you about the sale and provide you the chance to reinstate your loan. If you wish to purchase the vehicle back prior to the auction, you’ll need to pay the entire amount due and any costs associated with repossession. But many repossessed cars are auctioned off. It is your right to attend the auction and put in an offer on your car. 4. Lender pays you for any deficiency . When you sell the car, the lender will use the proceeds to cover what you are owed. However, the amount you paid for the vehicle could not cover the entire amount owed. If you owe more than what your lender gets for selling the vehicle, it’s a deficit. In most states you can be sued by your lender could be able to sue you for any defects. For instance, suppose you owe $10,000 however, your lender is able to sell it at $7,000. In that case the deficit is $3,000 and the lender may be entitled to claim the difference. However, if there is surplus to the sale, the lender could be required to distribute the money to you. This is rare, but if it does occur, you’ll at least have a small benefit of the transaction. Another method to avoid repossession is to use the following strategies. The prevention of repossession is the important concern for the majority of consumers. Since your car is probably a crucial part of your ability to earn a living. Some ways to avoid repossession include Reestablishing the loan If you are able to be current with your past due payments and the lender will allow you to reinstate the loan. This means that you’re bringing the matter back to the beginning. After reinstatement, you’ll have to make your usual car payments. Make sure you pay off the loan: Of course that paying off the whole auto loan is easier said than done. But if this option is possible there is a solution to avoid this. Refinancing is difficult given your credit score is taking the hit when you miss payments. If you can locate a new loan with the lowest interest rate, or regular payments, it might be the right choice to manage your finances. Declare bankruptcy. If you’re in debt on other debts The bankruptcy process could be an option. However, while there are options to do so but it’s not an assurance. Repossession may still happen in the event that you fail to find a workable solution. The downside to this option is that you’ll likely need to come up with the funds to settle the issue. The bottom line If you find yourself staring down the uncomfortable possibility of repossession contact your lender promptly. With open lines of communication, the lender could offer a bargain that works for everyone.


Writing by Contributing Writer Sarah Sharkey is a contributing writer for Bankrate. Sarah writes on a variety of topics, such as banking, savings tips homeownership, homebuying and personal financial matters. Edited 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 confidence to control their finances through providing concise, well-studied and well-researched content that break down complex topics into digestible chunks.

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