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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 offering you interactive tools and financial calculators, publishing original and objective content. This allows you to conduct your own research and compare information for free to 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 Profit The deals that are advertised on this website come from companies that pay us. This compensation can affect the way and when products are featured on the site, such as, for example, the order in which they may appear in the listing categories and other categories, unless prohibited by law for our mortgage, home equity, and other home lending products. This compensation, however, does not influence the information we provide, or the reviews that you read on this site. We do not cover the vast array of companies or financial deals that may be available to you.


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4 min read published April 22, 2022

Written by Kellye Guinan Written by Personal and business finance contributor

Kellye Guinan is a freelance editor and writer who has more than five years ‘ experience within personal financial matters. She’s also a full-time worker at her local library, helping the community gain access to information on financial literacy, as well as other subjects.

Edited by Rhys Subitch Edited by Auto loans editor

Rhys has been editing and writing for Bankrate from late 2021. They are passionate about helping readers feel confident to manage their finances with clear, well-researched information that breaks down otherwise complex topics into manageable bites.

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Default can happen after just one late payment, but in most cases the auto loans will not be canceled until you cease to pay for multiple months that can extend to 120 days typically. Your lender will likely give you a notice of default prior to repossessing your vehicle. In certain states, you’ll have the option of repaying what you owe, although it’s not always the case. Between repossession and default There are a number of ways to avoid your vehicle 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’ll need to remain in close contact to your lender and work on reorganizing your financial situation. 1. Keep in touch with your lender Maintain contact with your lender up to date on your current situation, your ability to make payments , and overall finances. Document every interaction, including the name and the title of every person you talk to and then send all letters via certified mail so that you can provide proof that you have done your part. They would rather have their customers pay back their car loans rather than repossess their cars. Make sure you have proof of your financial situation. If something changes, let your lender immediately. It’s important to be polite but firm when discussing the potential 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 assist you in obtaining your loan. 2. Request for a loan modification Repossession is a serious danger for the lender as well. It will need to take over your loan or hire someone to take possession of the vehicle to store it elsewhere and then sell it at auction. Due to this it is possible to approach the lender for a reduction in the amount. Your lender is likely to be able to to defer the payment for a couple of months or change the loan to help you make payments. Let your lender know the specifics of your circumstance and talk about the date and time you’ll be able to pay back. The lenders are not legally obligation to alter the terms of your loan, but it might help you and your lender avoid a lot of the hassle that repossession causes. 3. Be current on the loan If you are able to pay your loan in full and fees in order for the lender to reinstate the loan. This will end in the process of default and it is an effective method to . It is okay if this option isn’t available to you. For the majority of people who are facing repossession, paying off the loan isn’t possible. There are a few ways to get the money — such as — but it may put a different type of pressure on your lifestyle. 4. Sell the car if an auto loan is too expensive every month, you could sell your car privately . Provided you aren’t in a position to be upside-down on your loan — when you owe more than it’s worth — you could switch to a more affordable vehicle. Make sure that the sale of your car will be sufficient to pay off the total portion of the loan and any fees you owe. If not, it’s best to negotiate with your lender and see if it might permit you to write off fees. In the end, selling your car won’t give you enough of a an amount to pay for another car. When you’re between repossession and either selling or surrendering the vehicle the car, you’ll be left without transportation no matter what. Selling your car will keep your credit in good standing, but it could put you in a situation like repossession. 5. Refinance your loan Extending the loan term or lowering the rate of interest can help make your automobile loan cheaper. If you’ve missed multiple payments and are currently in default you probably do not have the credit . But that does not mean that you should not consider it. Online lenders and credit unions, along with smaller local banks offer more flexibility in terms of requirements. Remember that applying for financing could negatively impact your credit score, so make sure that you apply for a few loans at once to avoid multiple hits. It is possible that you will not be able to reduce your interest rate but extending your loan term is a possibility. This can make your monthly payments much more affordable. However, this means that you’ll pay more interest overall. It could be worth the cost to prevent repossession however, it should be done after you have exhausted other options. 6. Surrender your car You have the option to voluntarily surrender your car to your lender when you can’t pay. You will no longer have access to it and must consider alternative options to move around the situation, but it will not be considered a repossession, but your credit score may be affected. If you do this, your lender will undergo the same process as repossession. They will then take possession of and auction off your car. If the sale price covers the amount you owe on your credit card, you’re covered. If not, you will be responsible for the remaining loan amount and any charges you’ve accrued. The auto repossession process operates Once you’re in default, your lender is entitled to seize your car. If your state’s law states that it is not required, repossessions don’t require an announcement or warning. That means that you can lose your vehicle anytime after you’ve defaulted. If your car is repossessed, your lender could provide you with information about the auction in which your vehicle will be sold. Otherwise, you may be able of reestablishing your loan by getting caught up on the past-due amount and any fees for repossession. Similar to everything else in the repossession process the information that the lender is required to give you is contingent on your state. The next steps Repossession will stay on your credit report for years and make it more difficult to secure an auto loan. Make sure you are on top of each step, talking with the lender and doing all you can to stop repossession. While not all options will be available to you however, these are options worth considering when you’re facing losing your car. Find out more


Written by Business and personal finance Contributor

Kellye Guinan is a freelance editor and writer with over five years of experience in personal financial matters. She is also a full-time librarian at the local library, where she assists the community gain access to information on financial literacy, in addition to other topics.

The edit was done by Rhys Subitch Edited by Auto loans editor

Rhys has been writing and editing for Bankrate from late 2021. They are committed to helping readers gain the confidence to control their finances through providing precise, well-studied data that breaks otherwise complex subjects into digestible pieces.

Auto loans editor

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