Car Repossession and How to Avoid it

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After failing to make a payment on your car loan, it can become a default. Most loans will be charged off once you default for several months, typically around 120 days.

Your lender will then send you a notice of default, which usually allows you to pay what’s owed.

However, in some states, you may still be able to get a chance to avoid getting your car taken away.

There are a few tricks that you can use to prevent it from happening. The article covers all you need to know about car repossession and how to avoid it.

Table of Contents

Car Repossession

When a lender takes possession of a vehicle without warning you or securing court permission, it is called a “repossession.”

This type of action can happen without warning. Before buying a car, ensure the contract includes details about how and when your lender can repossess it.

After you fall behind on your payments, your lender may begin repossessing your vehicle.

Depending on your contract, this can happen after the first missed payment. If you file for bankruptcy, an automatic stay can help prevent creditors from pursuing collection actions.

An automatic stay can also help prevent the car from being taken away. However, the lender can still ask the court to overturn the stay.

In some states, lenders are required to notify you before they can repossess your vehicle.

This can include letting you know that your payments have been missed and giving you time to make up the money.

How to Avoid Car Repossession

If you default or are at risk of it, you could lose your car. However, you must maintain a close relationship with your lender and work on a restructuring plan to avoid this.

The following are ways to go about that:

Maintain Close Communication With Your Lender

Your lender should know your current financial situation and ability to make payments.

Also, keep in mind that you should regularly communicate with them. They would prefer that you pay your loans instead of having them repossess your car.

You should also provide your financial situation and any changes that might happen to it.

Tell them right away. It’s essential to be firm and polite when talking about the possibility of losing your car.

You can avoid this by asking for help from the management line.

You Can Request a Loan Modification

Repossession can be a significant risk for the lender. It can involve hiring someone to repossess your car and then selling it at an auction.

If you ask the lender for a lower payment, this could help you keep up with your payments.

You should also discuss your situation with your lender so that they can modify your loan to help you keep up with your payments.

Although they are not obligated to do so, lenders can change your loan to help you avoid a lot of trouble.

You Can Sell the Car

If you have a high auto loan amount and are struggling to make payments, you can sell your car or trade it at a dealership.

You might switch to a more affordable vehicle if you need more money to pay the high-interest rate.

Before you make a deal, make sure that the sale will cover the balance of your loan and any fees and taxes.

If you can’t make the payments, you must negotiate with your lender to see if it will allow you to write off the fees.

However, selling your car could leave you with insufficient money to purchase another vehicle. Repossession or surrendering the car could leave you without transportation, and selling could put you in a similar situation.

Return the Car

If you can’t pay your car loan, you can surrender it to your lender. This will not affect your credit score, though it will prevent you from accessing the car.

Your lender will then go through the same process as repossession and sell your vehicle at an auction.

You will be responsible for any fees and the remaining balance if the sale price doesn’t cover the loan amount.

Conclusion

We have outlined in detail what car repossession is and how you can avoid it.

If your car is in danger of being repossessed by a lender, we advice you to follow the above steps to avoid repossession.