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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 goal is to help you make better financial choices by providing you with 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 financial decisions with confidence. Bankrate has agreements with issuers such as, but not limited to, American Express, Bank of America, Capital One, Chase, Citi and Discover. How We Earn Money The deals that are advertised on this website come from companies who pay us. This compensation can affect the way and where products appear on this site, including for instance, the order in which they may appear within the listing categories, except where prohibited by law for our loans, mortgages,, and other home lending products. This compensation, however, does affect the information we provide, or the reviews that you read on this site. We do not include the vast array of companies or financial deals that may be accessible to you.
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4 min read published April 22 2022
Writer: Kellye Guinan. Written by Personal and Business Finance Contributor
Kellye Guinan is a freelance editor and writer with over five years of experience in personal finances. She is also a full-time worker at her local library, helping the community gain access to information on financial literacy, in addition to other subjects.
Editor: Rhys Subitch Edited by Auto loans editor
Rhys has been editing and writing for Bankrate from late 2021. They are committed to helping readers gain the confidence to take control of their finances through providing 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 late payment, but generally the auto loans won’t be charged off until you stop paying for multiple months that can extend to 120 days typically. The lender will likely send the notice of default prior to taking possession of your vehicle. In certain states, you’ll have the option of repaying the amount you owe, but this may not be the case in all states. Between repossession and default, there are a few ways to avoid your vehicle to be taken. Six ways to stay out of repossession If your debt is in arrears or are at the risk of being in default repossession is a possible possibility. To avoid it, you’ll need to remain in close contact to your lender and restructure your finances. 1. Keep in touch with you lender Keep your lender up-to-date on your current situation, your ability to make payments , and general financial health. Record 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 evidence the efforts you’ve made. They would rather have their customers pay on their car loans instead of repossessing their vehicles. Be prepared to provide proof of your financial situation. If anything should change you need to let your lender know immediately. It pays to be polite but firm when discussing the potential of repossession. It is best to avoid repossession at all cost So, keep calling the management line until you get someone to help you with your loan. 2. Request a loan modification. A repossession is a significant chance for the lender, too. They will need to pay off your loan or hire someone to seize the car then store it in a safe place and then auction it off at auction. Because of this, it may be effective to approach the lender to make a lower payment. Your lender may be able to defer a few payments or restructure the term to help you make payments. Let you lender know the specifics of your situation and discuss when and how you will be able to make repayments. The lenders are not legally obligation to modify your loan however it could help you and your lender avoid a lot of the hassle that repossession causes. 3. Make sure you are current on your loan If you can, make up your payments and charges and ask the lender to reinstate your loan. This will stop your default, and will be the most efficient method to . This is fine if this option isn’t available to you. For the majority of people who are facing repossession, getting current on the loan is not possible. There are options to access the money — but they could put a different type of stress on your life. 4. Sell the car if an auto loan is too expensive each month, you may sell your car privately or . Provided you aren’t over the limit on your loan (when you are owing more than what it’s worth — you could move to a cheaper vehicle. Ensure that selling your car will pay for the amount of your loan as well as any other charges you have to pay. If you aren’t able to, it’s best to negotiate to your lender and see if it could permit you to write off fees. Most importantly, selling your car may not provide you with the a down payment to purchase another car. If you are in between repossession, selling the vehicle or surrendering it, you will be not able to travel no matter what. Selling your car will keep your credit score intact, however it can result in a situation similar to repossession. 5. Refinance your loan The extension of your loan duration or decreasing the rate of interest can help make your automobile loan less expensive. However, if you’ve fallen behind on payments, or are in default, you probably aren’t in a position to get the credit you need . However, that isn’t a reason to not attempt. Credit unions and online lenders, along with smaller local banks offer more flexibility in terms of requirements. Be aware that applying for financing can affect the credit rating of your client, therefore make sure to apply for several loans simultaneously to prevent multiple impacts. It is possible that you will not be able lower your interest rates, but extending the loan term is a possibility. This could make your monthly payments much more affordable. However, this means that you will pay more in interest overall. It might be worth the extra cost to prevent repossession however it should only be done only after you’ve exhausted all other options. 6. Don’t hesitate to surrender your car the option of voluntarily surrendering your vehicle to your lender when you can’t pay. You will no longer have access to it and you will have to think of alternative options to move around however it will not be considered repossession — but your credit score may still decrease. When you do it, your lender will go through a similar process as repossession. They will then take possession of and sell your car at auction. If the price of the sale is greater than what you owe, you’re in good shape. If not, you’ll be responsible for the remaining loan amount and any charges you’ve accrued. What happens when you default on your auto repossession works Once you are in default and your lender is entitled to repossess your car. Unless the law of your state says otherwise, repossession doesn’t need an announcement or warning. This means you could lose your car at any time once you’ve defaulted. If your vehicle is taken and you are in default, your lender may give you details for the auction where the vehicle will be auctioned off. Otherwise, you may be able to reinstate your loan by catching in the overdue amount as well as any other fees associated with repossession. As with everything else in the repossession process the details your lender must provide you will depend on the state in which you reside. The next steps Repossession remains in your credit file for a long time and make it harder to get a new auto loan. Be sure to keep up with every step communicating with the lender and doing all you can to avoid repossession. Although not every alternative will be available however, these are options worth considering in the event of losing your vehicle. Find out more
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Written by a Personal and Business finance contributor
Kellye Guinan is a freelance editor and writer who has more than 5 years experience working in the field of personal financial matters. She is also a full-time worker at her local library, where she assists her community access information about financial literacy, in addition to other subjects.
Edited by Rhys Subitch Edited by Auto loans editor
Rhys has been editing and writing for Bankrate from late 2021. They are committed to helping readers gain the confidence to control their finances by providing concise, well-researched and well-informed information that breaks down otherwise complicated topics into bite-sized pieces.
Auto loans editor
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