Can you repay the car loan so that you don't have to repossess it? 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 tools and financial calculators that provide objective and original content, by enabling users to conduct research and compare information for free to help you make sound financial decisions. Bankrate has agreements with issuers, including but not limited to, American Express, Bank of America, Capital One, Chase, Citi and Discover. How We Earn Profit The deals that are advertised on this site are from companies that compensate us. This compensation may impact how and when products appear on this site, including such things as the order in which they appear within the listing categories, except where prohibited by law. Our mortgage or home equity products, as well as other products for home loans. This compensation, however, does affect the information we publish, or the reviews that you see on this site. We do not cover the entire universe of businesses or financial offers that may be available to you. Srinrat Wuttichaikitcharoen/EyeEm/Getty Images
5 minutes read. Published November 28th, 2022.
Sarah Sharkey Written Sarah Sharkey Written by Contributing Writer Sarah Sharkey is a contributing writer for Bankrate. Sarah writes about a range of subjects, such as savings, banking homeownership, homebuying, and personal financial matters. Edited by Rhys Subitch Edited By Auto loans editor Rhys has been writing and editing for Bankrate since the end of 2021. They are passionate about helping readers gain confidence to control their finances with concise, well-researched and precise information that breaks down otherwise complex topics into manageable bites. The Bankrate guarantee
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We receive compensation for the placement of sponsored products or services, or through you clicking certain links posted on our website. This compensation could impact how, where and in what order items appear within listing categories and categories, unless it is prohibited by law for our mortgage home equity, mortgage and other home lending products. Other factors, such as our own website rules and whether a product is available in the area you reside in or is within your self-selected credit score range could also affect the way and place products are listed on this site. We strive to provide an array of offers, Bankrate does not include details about every 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 fall behind on the payments you have made and your car is at risk of repossession There's good news that you can take action to stop this unfortunate conclusion. Between reinstatement and loan modification There are a variety of options to prevent repossession. Does paying off a car loan stop the repossession process? The rules for repossession differ based on the state that you reside in. In the majority of states, the lender can repossess the vehicle when you're in default. Depending on the terms of your loan agreement, this could mean missing one or two payments. There are several steps between missing a payment to the eventual repossession of your car. Based on the current circumstances, you can take the appropriate steps . If you've not received any notification that you are unable to make your car payment, you'll likely know about that financial reality well before your lender does. Instead of waiting for the lender to find out when you don't pay make sure you call the lender to explain the situation. The lender might be willing take your concerns into consideration to avoid the expense of repossession. Make an effort to find a reasonable solution together. For example, you could offer more information about your circumstances, such as when you can make the next payment , or the amount you can pay right now. Depending on your history with the lender it is possible that you will be able to work out a temporary reprieve or . This is especially the case in the case of this being the first time you've ever missed a payment. If the lender has sent only notice A lender can legally repossess your car with or without notice in many states. However, your lender will likely mail you a notice of its intentions to take possession of the vehicle prior to when it actually happens. If you receive notice of repossession the first phone call you need to make is to your lender. Again, an open line of communication between you and the lender could lead to an option that prevents repossession. In the meantime, waiting until you get notice of repossession means that you'll be playing catch-up when explaining the situation to your lender. If your lender is willing to listen to you out, give as much information as you can regarding when you'll be able to pay. Also volunteer how much you are able to pay towards a payment now. In the end, it's in the lender's best interest to come up with an interim arrangement. In the end, the company wants to get paid, and you'll probably need your vehicle to go to work. Based your lender and your history it is within the possible. When the lender has begun the process If the lender has already begun the process of repossession it is possible that you will not be able access your vehicle. In this case, restitution or restitution of the loan or loan modification known as curing the default -- could be the best option. In some states, you'll need to pay the entire past-due amount. This includes any missed payments along with any late fees that accrued. Usually, the lender will also ask you to pay repossession charges prior to releasing the vehicle to you. In other states, you might have to pay off the entire loan to get your car back. This process is known as 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 must nevertheless contact your lender. They may be willing to alter your loan so that it includes it. How auto repossession works repossession is a stressful experience. Understanding the process can aid you in navigating it, and possibly discover an answer. 1. When a borrower is late on payments, the lender is entitled to repossess the vehicle in the event that you become in default, and also to send it send it to a debt collection company. The exact amount of missed payments that are required to be in default on your loan will depend on the state you live in and your loan contract. In certain situations it is only necessary only miss one installment for you to become in default. In other cases it is possible to make three or more payments to cause an issue. In this situation, clear dialogue between you and your lender is critically important. If you are able to work out a reprieve, now is the perfect time to make an inquiry. 2. Lender takes your car Once you are in default Your lender may or may not notify you of its intention to take possession of the car. Call your lender to request an interim payment plan to avoid repossession should you get a notice. Based on the state you live in the lender may be able to repossess your car at any time -- whether or not you've received a notice. 3. Lender sells the vehicle once the lender has possession of the vehicle It could keep the car until you are caught up with the loan. But the more likely outcome will be that the lender will eventually sell the car. In several states the lender must inform you about the sale and provide you the opportunity to reinstate your loan. If you wish to purchase the car back before the sale, you'll need to pay the full amount owed , including any fees associated with repossession. Many repossessions are sold through auction. You are entitled to attend and make 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 what you have to pay. But the sale price might not be enough to pay your entire debt. If you owe more than your lender gets in exchange for selling the car, that's an indeficiency. And unfortunately, in most states the lender could claim any deficiency. Let's say for instance that you owe $10,000, however, your lender only sells it for $7,000. In this scenario the deficit is $3,000 and the lender may have the right to pursue you for the difference. If there's a surplus from the sale, the lender might be required to pass it to you. It's not common, but if it does occur, you'll probably get a little benefit of the transaction. Other methods to avoid repossession Refusing repossession is a major concern for many consumers. In the end, your car is probably a crucial part of your ability to earn money. Some ways to avoid repossession are: Reinstate the loan: If you can be current with your past due payments, the lender will allow you to reinstate the loan. Essentially, that means you're bringing your situation back to square one. When you are reinstated, you'll need to keep making your regular car payment. Make sure you pay off the loan Naturally that paying off the whole auto loan is easier said than done. However, if this is possible, it is one option to get out of this. Refinancing: This can be difficult as your credit score is taking the hit when you miss payments. However, if you are able to find an alternative loan with a lower interest rate or regular payments, it might be the right choice to manage your finances. Declare bankruptcy. If you're in debt on other debts, bankruptcy may be an option. While there are methods to avoid bankruptcy but it's not an assurance. Repossession can still occur when you don't discover a solution that works. The disadvantage of this option is that you'll probably need to come up with some amount of cash to solve the problem. The main point is that if you're faced with the uncomfortable possibility of repossession, talk to your lender promptly. If you are able to communicate with them in a clear manner, the lender may offer a deal that is suitable for all.
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Writing by Contributing Writer Sarah Sharkey is a contributing writer for Bankrate. Sarah writes about a range of topics, such as savings, banking, homebuying, homeownership and personal finance. Edited by Rhys Subitch Edited by Auto loans editor Rhys has been writing and editing for Bankrate since late 2021. They are enthusiastic about helping readers gain the confidence to manage their finances by providing clear, well-researched information that break down complex topics into digestible chunks.
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