Can you pay off the car loan in order to avoid repossession? Advertiser Disclosure Advertiser Disclosure We are an independent, advertising-supported comparison service. Our mission is to help you make better financial decisions by providing you with interactive financial calculators and tools, publishing original and objective content. We also allow you to conduct research and compare information for free to help you make sound financial decisions. Bankrate has partnerships with issuers, including 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 site come from companies who pay us. This compensation could affect how and when products are featured on the site, such as for instance, the sequence in which they be listed within the categories of listing in the event that they are not permitted by law for our mortgage, home equity and other products for home loans. But this compensation does not influence the content we publish or the reviews that you read on this site. We do not contain the universe of companies or financial offers that may be accessible to you. Srinrat Wuttichaikitcharoen/EyeEm/Getty Images
5 minutes read. Published November 28th, 2022.
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 finance. Written by Rhys Subitch Edited by Auto loans Editor Rhys has been writing and editing for Bankrate from late 2021. They are passionate about helping readers gain the confidence to manage their finances with detailed, well-studied information that breaks down complicated topics into bite-sized pieces. The Bankrate promise
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This compensation could affect the way, location and when products are listed, except where prohibited by law. We also offer mortgage home equity, mortgage and other home lending products. Other elements, like our own rules for our website and whether or not a product is available in your area or at your personal credit score can also impact the manner in which products appear on this website. Although we try to offer the most diverse selection of products, Bankrate does not include specific information on every financial or credit products or services. The number of repossessions on cars has grown dramatically from 2020, according to reports . If you fall behind on your payments and your vehicle could be in danger of repossession There's good news that you can take steps to prevent this dreadful outcome. Between reinstatement and loan modification There are a variety of options to prevent repossession. Do paying off a vehicle loan stop the repossession process? The rules for repossession differ based on the state in which you reside. In many states, the lender can repossess the vehicle when you are in default. Depending on the terms of your loan agreement, this could mean missing just one payment. There are many steps from missing a payment up to the ultimate repossession of your car. Based on your current situation, you can take the appropriate steps . If you've never received any notice If you're unable to make your auto payment, you'll be aware about that financial reality well before your lender will. Instead of waiting for the lender to know that you fail to pay take the initiative and contact the lender to explain your situation. The lender may be willing to hear you out to avoid the expense of repossession. You should try to reach an acceptable solution. For example, you can give more details regarding your situation, when you will be able to make your next installment or what you are able to pay today. Depending on your history with the lender it is possible that you will be able to negotiate an interim reprieve or . This is especially true in the case of this being the first time that you've been in the habit of missing a payment. When the lender has not sent notice, a lender may legally take possession of your vehicle with or without notice in many states. However, your lender is likely to send you a notification of its plans to repossess your vehicle before it happens. If you are given an official notice of repossession, the first call you should make is to your lender. Again, an open channel of communication between you and your lender may result in the resolution that stops repossession. Waiting until you receive an email means you'll be caught up in explaining the issue in front of your lender. If your lender will listen to you out, give as many details as possible regarding when you'll be able to make a payment. You should also indicate how much you can put to make a payment today. In the end, it's advantageous for the lender to come up with an interim arrangement. In the end, the company needs to be paid and you will likely need your car to get to work. Based your lender and your past it is within the realm of possibility. If the lender has begun the process. If the lender has already begun the repossession process it is possible that you will not be able to access your vehicle. In this case, restitution to your loan or loan modification known as curing the default- could be the best option. In some states, you'll have to make payments for the entire due amount. This includes any missed payments along with any late fees that accrued. Typically you will find that the lender will also require that you pay for repossession costs before releasing the vehicle to you. In some states, you might be required to repay the entire loan to get your car back. This process is known as redemption. Not every state allows for reinstatement. If your state does not have reinstatement laws and it's not included in the contract, it's best to still reach out to your lender. They may be willing to amend the terms of your loan so that it includes it. What happens when you auto-repossession repossession is a stressful experience. But understanding the process can help you work through it and eventually discover solutions. 1. When a borrower is late on payments, the lender can take possession of the vehicle in the event that you become in default, and to be able to transfer the vehicle to a debt collection agency. The number of missed payments required to be in default on your loan depends on your state as well as your loan contract. In certain situations it is only necessary make one missed payment for you to fall into default. In other cases you may need to be late by two or three times in order for an issue to occur. In this situation, clear contact between you and your lender is critically important. If you are able to negotiate an extension, now's the right time to inquire. 2. Lender will take your vehicle once you are in default Your lender may or may not send you a notice of its intent to repossess the car. Contact your lender to request an interim payment plan to avoid repossession in the event that you receive an email. In the event of a state-wide restraining order and the state of your car, the lender may be able to take possession of your vehicle at any time , regardless of whether you've received notice. 3. Lender sells the vehicle once the lender has taken possession of your car the lender may hold the car until you are caught up with the loan. The most likely scenario is that the lender will sell the vehicle. In many states, the lender must inform you of the sale and give you the chance to reinstate your loan. If you wish to purchase the vehicle back prior to the sale, you'll have to pay the entire amount owed , including any repossession expenses. However, many repossessions are auctioned off. You have a right to attend and make a bid on your vehicle. 4. Lender pays you for any deficiency . When you sell the car, the lender must use those funds to cover what you have to pay. However, the amount you paid for the vehicle could not cover your entire debt. If you owe more than what your lender gets in exchange for selling the vehicle, it's a deficiency. Unfortunately, in many states, your lender can sue you for any deficiencies. Let's say for instance that you owe $10,000, however, your lender is able to sell it at $7,000. In that case the deficit is $3,000 and the lender may be entitled to sue you for the difference. In the event of a surplus from the sale, the lender could be required to distribute the money to you. It is not a common scenario, but if it does occur, you'll at least have a small gain from the sale. Another method to avoid repossession is to use the following strategies. The prevention of repossession is the important concern for the majority of people who borrow. In the end, your car is probably a crucial part of your ability to earn money. There are a few options to avoid repossession include: Reinstate the loan: If you can get current on your past-due payments, the lender will allow you to reinstate the loan. Essentially, that means you are bringing the situation back to the beginning. After reinstatement, you'll have to keep making your regular car payment. Pay off the loan Naturally that paying off the entire auto loan is easier said than done. But if this option is in your reach this is a option to get out of this. Refinancing is difficult as your credit score suffers the hit when you miss payments. However, if you are able to find an alternative loan with the lowest interest rate, or monthly payment, could be the best option for your finances. Declare bankruptcy. If you're behind on other debts, bankruptcy may be an alternative. However, while there are options to do so however, it's not a sure thing. Repossession can still occur if you aren't able to come up with a viable solution. The downside to these possibilities is that you'll likely require the funds to resolve the situation. The bottom line If you find yourself staring down the uncomfortable possibility of repossession discuss the situation with your lender promptly. Through open communication with your lender, the lender might be able to offer a solution that works for everyone.
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The article was written by a contributing writer Sarah Sharkey is a contributing writer for Bankrate. Sarah writes about a range of topics, such as banking, savings tips, homebuying, homeownership and personal finances. Written by Rhys Subitch Edited by Auto loans editor Rhys has been writing and editing for Bankrate since late 2021. They are committed to helping readers gain confidence to take control of their finances with concise, well-studied and well-researched content that breaks down complicated subjects into bite-sized pieces.
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