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5 minutes read. Published November 28, 2022
The article was written by Sarah Sharkey Written by Contributing Writer Sarah Sharkey is a contributing writer for Bankrate. Sarah writes about a range of topics, including savings, banking homeownership, homebuying, and personal finances. Written by Rhys Subitch and edited By Auto loans editor Rhys has been editing and writing for Bankrate from late 2021. They are dedicated to helping readers gain confidence to manage their finances by providing clear, well-researched information that breaks down otherwise complex topics into manageable bites. The Bankrate guarantee
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We are compensated in exchange for placement of sponsored products and, services, or through you clicking certain links posted on our site. So, this compensation can impact how, where and when products are listed in the event that they are not permitted by law for our mortgage or home equity products, as well as other products for home loans. Other factors, like our own proprietary website rules and whether a product is available in your area or at your self-selected credit score range may also influence the manner in which products appear on this site. While we strive to provide a wide range offers, Bankrate does not include specific information on each credit or financial item or product. The number of repossessions on cars has grown dramatically in the last few years, as per reports . If you are in arrears with your obligations and your car is in danger of being taken away There’s good news that you have the option of taking steps to avoid this unfortunate outcome. Between reinstatement and loan modification you have a number of opportunities to avoid repossession. Can paying off a car loan stop the repossession process? The rules for repossession differ depending on the state you live in. In most states, the lender can repossess the vehicle as soon as you’re in default. Based on the terms of the terms of your loan agreement, this could mean you have missed one or two payments. There are many steps from missing a payment up to the ultimate repossession of your car. Based on the current circumstances, you can take the appropriate actions . If you haven’t received any notice that you’re unable to make your auto payment, you’ll probably know about this financial fact before your lender does. Don’t wait for your lender to find out when you don’t pay take the initiative and contact the lender to explain the situation. The lender may be willing to hear you out in order to avoid the costs of repossession. Make an effort to find a reasonable solution together. For example, you could provide more details about your situation, including when you’ll be able to make the next installment or what you are able to pay today. Based on your past relationship with the lender and your credit score, you may be able to negotiate a temporary reprieve or . This is especially the case if this is the first time you have had to make a missed payment. In the event that your lender has not sent notice A lender may legally take possession of your car with or without notice in a variety of states. But your lender is likely to send you a notice of its plans to repossess your vehicle before it actually happens. If you are given notice of repossession the first call you should contact your lender. Again, an open dialogue between you and the lender may result in the resolution that stops repossession. Waiting until you receive an email means you’ll be playing catch-up when you explain the issue to your lender. If the lender is willing to listen to you out, give as many details as possible regarding the time you’ll be able to pay. Additionally, let them know how much money you can put towards a payment now. Ultimately, it can be advantageous for the lender to negotiate an arrangement that is temporary. The business wants to get paid, and you’ll probably need your car to get to work. Based upon the lender and your history an agreement that is temporary is not out of the possibility. In the event that your lender has started the process. If it is the case that the lender has already started the process of repossession it is possible that you will not have access to your vehicle. In this instance, the reinstatement or restitution of the loan or loan modification known as curing the default — could be the best possible outcome. In certain states, you’ll be required to make payments for the entire due amount. This includes all missed payments plus any late fees that accrued. Typically the lender will also ask that you pay for repossession costs prior to releasing the car to you. In some states, you may have to pay off the total loan in order to receive your vehicle back. This process is called redemption. Not every state allows for reinstatement. If your state doesn’t have laws governing reinstatement and it’s not a part of your contract, you should still reach out to your lender. It might be willing to amend your loan in order to incorporate it. What happens when you auto-repossession repossession is an unpleasant experience. However, understanding the process will aid you in navigating it, and possibly discover solutions. 1. If a borrower fails to pay, your lender can repossess the car when you’re in default — and to send it to a debt collection company. The number of missed payments required to default on your loan will depend on the state you live in and your loan contract. In some cases it is only necessary to miss one payment to become in default. In other cases it is possible to miss two or three payments to cause an issue. At this stage, open dialogue with your lender is vitally important. If it’s possible to work out an extension, now is the time to ask. 2. Lender takes your car Once in default Your lender could or might not notify you of its intention to repossess the vehicle. Call your lender to ask for a temporary payment arrangement to avoid repossession in the event that you receive an email. Depending on your state the lender may be able to repossess your car anytime — regardless of whether you’ve received notice. 3. Lender sells the car once the lender has possession of your vehicle the lender may hold the car until you are caught up with your loan. However, the most likely outcome will be that the lender will eventually sell the car. In several states the lender will notify you of the sale and give you the chance to reinstate your loan. If you wish to purchase the vehicle before the sale, you’ll need to pay for the entire amount owed , including any costs associated with repossession. However, many repossessions are sold through auction. You have a right to be there and place an offer for your car. 4. Lender pays you for any outstanding balance. After you sell the car the lender will use the proceeds to pay the debt you owe. But the sale price could not be enough to pay your entire debt. If you owe more than your lender gets for selling the vehicle, it’s a deficiency. In most states the lender could be able to sue you for any defects. Let’s say for instance you owe $10,000 but your lender will only offer it for $7,000. In that scenario the deficit is $3,000, and the lender may have the right to sue you for the difference. However, if there is surplus to the sale and the lender could be required to distribute it to you. It is not a common scenario, but if it does occur, you’ll at the very least get a tiny profit by selling the property. Other methods to avoid repossession The prevention of repossession is the major concern for many consumers. In the end, your car is probably a crucial part of your ability to earn an income. Some ways to avoid repossession are: Reinstate the loan If you make your overdue payments then the lender will allow you to reinstate your loan. In essence, you are bringing the situation back to square one. After reinstatement, you’ll have to continue making your regular car payment. Make sure you pay off the loan Then that paying off the entire auto loan is a lot easier said than done. If this is within reach there is a way to exit this situation. Refinancing: This can be difficult as your credit score is taking a hit from missing payments. But if you can find a new loan with the lowest interest rate, or regular payments, it might be the right choice for your financial situation. Declare bankruptcy. If you’re behind in other charges If you are in debt, bankruptcy could be an alternative. While there are ways to however, it’s not a sure thing. Repossession may still happen when you don’t come up with a viable solution. The disadvantage of these possibilities is that you’ll probably require an amount of money to resolve the situation. The bottom line If you’re facing the uncomfortable possibility of repossession discuss the situation with your lender as soon as possible. If you are able to communicate with them in a clear manner, the lender could offer a bargain that works for everyone.
The article was written by a contributing writer Sarah Sharkey is a contributing writer for Bankrate. Sarah writes about a wide range of topics, such as banking, savings tips homeownership, homebuying and personal finance. Editor: Rhys Subitch Edited by Auto loans editor Rhys has been editing and writing for Bankrate since late 2021. They are enthusiastic about helping readers gain confidence to control their finances with precise, well-studied information that break down complex topics into digestible chunks.
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