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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 smarter financial decisions by offering you interactive tools and financial calculators that provide objective and unique content, by enabling you to conduct research and compare data for free - so that you can make financial decisions with confidence. Bankrate has partnerships with issuers including, but not limited to American Express, Bank of America, Capital One, Chase, Citi and Discover. How We Make Money The offers that appear on this site are from companies who pay us. This compensation can affect the way and when products are featured on the site, such as, for example, the sequence in which they be listed within the categories of listing and other categories, unless prohibited by law. This applies to our loan products, such as mortgages and home equity, and other home lending products. But this compensation does not influence the information we publish, or the reviews that you read on this site. We do not include the vast array of companies or financial offerings that could be accessible to you.



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4 min read Published April 22nd, 2022
Writer: Kellye Guinan. Written by Personal and business finance contributor

Kellye Guinan is a freelance editor and writer with more than 5 years experience working in the field of personal financial matters. She's also a full-time worker at her local library where she helps her community access information about financial literacy, among other topics.







Edited 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 to control their finances by providing precise, well-researched and well-written facts that break down complex topics into manageable bites.









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A default could occur as a result of just one late payment, but in most cases it's not a problem. Auto loans aren't charged until you stop making payments for multiple months which can be up to 120 days, generally. The lender is likely to send the notice of default prior to repossessing your car. In certain states, you will have the opportunity to pay back the amount you owe, but this isn't always the case. Between repossession and default, there are a few strategies to stop your car from being taken. Six strategies to prevent repossession If your debt is in arrears or are at risk of it, repossession is a real possibility. To avoid it, you will need to remain in close contact with the lender and also restructure your financial affairs. 1. Maintain contact and keep in contact with your lender Keep your lender up to date on your situation, ability to pay and general financial health. Keep a record of every interaction, including the name and title of each person you speak to, and send any letters through certified mail to provide proof of your efforts. The lenders would prefer that their customers pay for their auto loans rather than repossess their vehicles. Prepare to submit proof of your financial situation. If anything should change you need to let your lender immediately. It's important to be polite but and firm when discussing the possibility of repossession. You want to avoid it at all cost So, keep calling the manager until you can find someone to assist you in obtaining your loan. 2. Request for a loan modification. A repossession is a significant danger for the lender as well. It will need to charge off your loan or hire someone to seize the car, store it somewhere and then sell it at auction. Because of this it is possible to request the lender for a reduced payment. Your lender is likely to be able to defer a few payments or restructure the term to help you keep up with payments. Make sure to let your lender know the details of your circumstance and talk about the time and method by which you'll be able to make repayments. The lender is not under any legal obligation to modify the terms of your loan but they could reduce the amount of the trouble that repossession can cause. 3. Be current on the loan If you can meet your monthly payments and fees with the lender to reinstate the loan. This will stop in the process of default and it is an efficient method of avoiding default . It's okay that this option isn't accessible to you. For the majority of people who are facing repossession, obtaining a current payment on the loan is not possible. There are some methods to obtain the money -- but it may put a different type of strain on your life. 4. Sell the car If an automobile loan is too expensive each month, you can sell your vehicle privately or . Provided you aren't over the limit on your loan which means you are owing more than what it's worth, you can move to a cheaper vehicle. Make sure that the sale of your car will cover the payoff amount of your loan and any fees you owe. If you aren't able to, it's best to negotiate the terms with your lender and determine if they will permit you to write off the fees. In the end, selling your car might not provide you with the money to make a downpayment to buy another vehicle. If you are in between repossession, surrendering the car or selling your car, you'll be not able to travel no matter what. Selling your car will keep your credit intact, but it may result in a situation similar to repossession. 5. Refinance your loan By extending your loan term or lowering your interest rate can allow your auto loan less expensive. However, if you've missed multiple payments and are currently in default you probably don't have the credit to . However, that isn't a reason to not try. Credit unions and online lenders, along with some local banks that are small, offer more flexibility in terms of requirements. Remember that financing applications can affect your score on credit, which is why make sure that you make an application for several loans simultaneously to prevent multiple hits. You may not be able to reduce your interest rate but extending the loan term is a possibility. This can allow your monthly installments to be more affordable. However, it means you will pay more interest in the long run. It could be worth the cost to avoid repossession however, it should be done after having exhausted other options. 6. Surrender your car You have the option of surrendering the car to your lender in the event that you are unable to pay. You won't have access to it , and you will have to think of alternative options to move around the situation, but it will not be considered repossession -- however, your credit score will be affected. When you do, your lender will go through similar procedures to repossession. It will collect and sell your car at auction. If the purchase price is more than the amount you owe, then you are in the clear. 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 is carried out Once you're in default the lender has the right to repossess your car. Unless your state law says otherwise, repossession doesn't need notification or notice. This means you could lose your car anytime after you've defaulted. If your vehicle is taken or seized, your lender might provide you with the details about the auction in which the vehicle will be auctioned off. Otherwise, you may be able to reinstate your loan by being able to catch in the overdue amount as well as any other fees associated with repossession. Similar to every aspect of the repossession process the information that your lender has to provide you will depend on the state in which you reside. The next steps Repossession will remain on your credit report for years, making it that much harder to get a new auto loan. Focus on keeping up with every step of the process, talking with the lender and doing all you can to avoid repossession. Although not every alternative will be available, they are worth trying in the event of losing your vehicle. Find out more


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Written by Personal and business finance Contributor

Kellye Guinan is a freelance editor and writer with over five years of experience in personal finance. She also works full-time as a worker at her local library, helping people in her community get information about financial literacy, as well as other topics.



Edited by Rhys Subitch Edited by Auto loans editor

Rhys has been editing and writing for Bankrate since late 2021. They are passionate about helping readers gain the confidence to control their finances with clear, well-researched facts that break down complicated topics into bite-sized pieces.






Auto loans editor




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