Can you repay your 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 offering interactive tools and financial calculators, publishing original and objective content, by enabling users to conduct research and compare data for free and help you make sound financial decisions. Bankrate has agreements with issuers including, but not restricted to, American Express, Bank of America, Capital One, Chase, Citi and Discover. How We Earn Money The offers that appear on this website are provided by companies that pay us. This compensation can affect the way and when products are featured on this website, for example such things as the order in which they be listed within the categories of listing and other categories, unless prohibited by law for our mortgage or home equity products, as well as other home lending products. But this compensation does affect the information we publish, or the reviews that you read on this site. We do not contain the entire universe of businesses or financial offerings that might be accessible to you. Srinrat Wuttichaikitcharoen/EyeEm/Getty Images
5 min read . Published November 28, 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, including banking, savings tips homeownership, homebuying and personal finances. Written by Rhys Subitch Editored By Auto loans editor Rhys has been writing and editing for Bankrate from late 2021. They are dedicated to helping readers gain the confidence to take control of their finances with concise, well-researched and precise facts that break down complex topics into manageable bites. The Bankrate promise
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Therefore, this compensation may impact how, where and in what order items are displayed within the categories of listing in the event that they are not permitted by law for our mortgage home equity, mortgage and other products for home loans. Other factors, like our own rules for our website and whether a product is offered in your region or within your self-selected credit score range may also influence the way and place products are listed on this website. While we strive to provide an array of offers, Bankrate does not include details about each credit or financial product or service. Repossessions of cars have increased dramatically in the last few years, as per reports . If you fall behind on the payments you have made and your car could be in danger of repossession, the good news is that you can take action to stop this unfortunate conclusion. In between reinstatement as well as loan modification, there are multiple opportunities to avoid repossession. Does paying off a car loan prevent repossession? Repossession rules differ based on the state that you reside in. In most states, the lender can repossess the vehicle as soon as you're in default. Based on the terms of your loan agreement, that could mean you have missed only one payment. There are a variety of steps to take from missing a payment up to the final repossession of your vehicle. Based on the situation you're in you should take the proper steps . If you haven't received any notification that you are unable to make your car payment, you'll be aware about this financial fact before your lender is aware. Don't wait for your lender to find out when you fail to pay make sure you call the lender to discuss your situation. The lender might be willing to hear you out in order to avoid the costs of repossession. Try to come to an acceptable solution. For example, you can give more details regarding your situation, including when you can make the next installment or what you're able to pay now. Based on your past relationship with the lender it is possible that you will be able to work out some sort of temporary reprieve, or . This is especially true when this is the first time that you've been in the habit of missing a payment. When the lender has only sent notice A lender is legally able to repossess your car without or with notice in a variety of states. But your lender will likely send you a notice of its intentions to repossess the vehicle before it actually occurs. If you are given notice of repossession the first call you should make is to your lender. Again, an open dialogue between you and your lender may result in an option that prevents repossession. In the meantime, waiting until you get an email means you'll have to catch up in explaining the issue in front of your lender. If the lender will listen to you out, offer as many details as possible about when you can make a payment. You should also indicate how much you are able to pay toward a loan in the present. Ultimately, it can be in the lender's best interest to come up with an interim arrangement. In the end, the company needs to be paid and you'll probably need your car to get to work. Based your lender and your personal history, a temporary agreement is within the possibility. In the event that your lender has begun the process If you are the lender has already begun the process of repossession and you do not have access to your vehicle. At this point, reinstatement of your loan -- also known as curing the defaultmay be the best alternative. In certain states, you'll have to pay the full past due amount. That includes every missed payment along with any late fees that have accrued. In most cases, the lender will also ask that you pay for repossession costs prior to releasing the vehicle to you. In other states, you could be required to repay the total loan to obtain your car back -- that process is known as redemption. Not every state allows for reinstatement. If your state doesn't have reinstatement laws and it isn't built into the contract, it's best to nevertheless contact your lender. They may be willing to modify your loan so that it includes it. What happens when you auto-repossession repossession can be a painful experience. But understanding the process can assist you to work through it, and possibly find an answer. 1. If a borrower fails to pay, your lender has the right to repossess the car when you're in default -- and also to send it be able to transfer the vehicle to a debt collection agency. The exact amount of missed payments that are required to be in default on your loan is determined by your state and the terms of your loan contract. In certain cases you only have to miss one 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 with your lender is vitally important. If you are able to work out an extension, now's the perfect time to make an inquiry. 2. Lender repossess your car once you're in default the lender could or might not give you notice of its intention to take possession of the car. Contact your lender to request a temporary payment arrangement to avoid repossession if you receive a notice. In the event of a state-wide restraining order and the state of your car, the lender might be able repossess your car at any time , whether or not you've received a notification. 3. Lender sells the car once the lender has taken possession of your car It could keep the vehicle until you pay up on your loan. The most likely scenario is that the lender will sell the vehicle. In several states the lender must inform you of the sale and offer you the chance to reinstate your loan. If you want to buy the vehicle back prior to the sale, you'll have to pay the full amount owed , including any repossession expenses. However, many repossessions are auctioned off. You are entitled to attend the auction and put in an offer for your car. 4. Lender sends your bill for any deficiency . When you sell the vehicle The lender must use those funds to pay what you owe. But the sale price may not cover the entire amount owed. If you owe more than your lender gets for selling the car, that's an indeficiency. In most states the lender can sue you for any deficiencies. Let's say for instance you owe $10,000 however, your lender only sells it for $7,000. In that case the deficit is $3,000, and the lender may have the right to sue you for the difference. However, if there is an excess from the sale and the lender may be required to transfer the money to you. It is not a common scenario, but if it does occur, you'll at least have a small benefit by selling the property. Other methods to avoid repossession Avoiding repossession is a important concern for the majority of people who borrow. After all, your vehicle is probably a crucial part of the way you earn money. Some ways to prevent repossession include: Reinstate the loan If you are able to get current on your past-due payments, the lender will allow you to reinstate the loan. This means that you're bringing your situation back to where it was. When you are reinstated, you'll need to keep making your usual car payments. Make sure you pay off the loan: Of course the process of paying off your entire auto loan is a lot easier said than done. If this is in your reach, it is one option to get out of this. Refinancing is difficult given your credit score is taking a hit from missing payments. If you can locate a new loan with the lowest interest rate, or monthly payment, could be the right move for your finances. Declare bankruptcy. If you're behind on other debts, bankruptcy may be an option. Although there are options to do so but it's not an assurance. Possession could still occur if you aren't able to discover a solution that works. The downside to this option is that you'll probably require the funds to solve the problem. The main point is that if you find yourself staring down the possibility of repossession, which is uncomfortable, 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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Written by Contributing Writer Sarah Sharkey is a contributing writer for Bankrate. Sarah writes about a wide range of subjects, including banking, savings tips homeownership, homebuying, and personal finance. Written by Rhys Subitch Edited by Auto loans editor Rhys has been writing and editing for Bankrate since the end of 2021. They are enthusiastic about helping readers gain the confidence to manage their finances through providing concise, well-studied and well-researched content that breaks down complicated topics into digestible chunks.
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