Are you able to pay off the car loan to avoid repossession? Advertiser Disclosure Advertiser Disclosure We are an independent, advertising-supported comparison service. Our goal is to help you make smarter financial decisions by providing you with interactive financial calculators and tools as well as publishing original and objective content. We also allow you to conduct research and compare data 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 Profit The deals that are advertised on this site are from companies that pay us. This compensation can affect the way and when products are featured on the site, such as for instance, the order in which they be listed within the categories of listing, except where prohibited by law. This applies to our mortgage home equity, mortgage and other home loan products. But this compensation does have no impact on the content we publish or the reviews appear on this website. We do not include the universe of companies or financial offers that may be available to you. Srinrat Wuttichaikitcharoen/EyeEm/Getty Images
5 min read . Published November 28, 2022
Written by Sarah Sharkey Written by Contributing Writer Sarah Sharkey is a contributing writer for Bankrate. Sarah writes on a variety of subjects, such as savings, banking homeownership, homebuying, and personal financial matters. Written by Rhys Subitch and edited By Auto loans editor Rhys has been writing and editing for Bankrate since late 2021. They are dedicated to helping readers gain the confidence to take control of their finances by providing clear, well-researched facts that break down complicated topics into bite-sized pieces. The Bankrate promise
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We receive compensation for the promotion of sponsored goods and, services, or when you click on specific links that are posted on our website. So, this compensation can affect the way, location and in what order items appear within listing categories, except where prohibited by law. This is the case for our mortgage or home equity products, as well as other products for home loans. Other elements, like our own proprietary website rules and whether or not a product is available within the area you reside in or is within your personal credit score may also influence the way and place products are listed on this website. We strive to provide an array of offers, Bankrate does not include information about every financial or credit product or service. Car repossession has increased rapidly since 2020, according to reports . If you are in arrears with your payments and your vehicle is at risk of repossession There’s good news that you can take steps to avoid this unfortunate outcome. In between reinstatement as well as loan modification, there are multiple opportunities to stay clear of repossession. Can paying off a car loan stop the repossession process? Repossession rules differ based on the state that you reside in. In many states there is a possibility that the lender can repossess the vehicle when you are in default. Based on the terms of your loan agreement, that could mean you have missed just one payment. There are a variety of steps to take between the time you miss a payment and the final repossession of your vehicle. Based on the situation you’re in you’re able to take proper steps . If you’ve not received any notice that you are unable to make your car payment, you’ll likely know about that financial reality well before your lender is aware. Don’t wait for your lender to discover that you don’t pay make sure you call the lender to explain the situation. The lender may be willing to listen to you in order to avoid the expense of repossession. Make an effort to find an agreeable solution. For example, you could offer more information about your situation, when you will be able to make your next payment , or the amount you are able to pay today. Depending on the history you have with the lender, you might be able to negotiate some sort of temporary reprieve, or . This is especially the case in the case of this being the first time you have been in the habit of missing a payment. When the lender has sent only notice, a lender can legally repossess your car without or with notice in a variety of states. But your lender is likely to send you a notice about its intention to take possession of the vehicle prior to when it actually occurs. If you are given a notice of repossession, the first phone call you need to make is to your lender. Also, a dialogue between you and your lender could lead to the resolution that stops repossession. Waiting until you receive notice of repossession means that you’ll be playing catch-up when explaining the issue with your lender. If your lender is willing to listen to you out, give as many details as possible regarding the time you’ll be able to pay. Additionally, let them know how much money you have available to put to make a payment now. In the end, it’s advantageous for the lender to work out an interim arrangement. The business needs to be paid and you will likely need your vehicle to go to work. Based upon the lender and your past it is not out of the possible. When the lender has started the process If the lender has already begun the repossession process it is possible that you will not have access to your vehicle. In this case, restitution of your loan or loan modification known as resolving the defaultmay be the best option. In certain states, you’ll have to make payments for the entire due amount. This includes all missed payments plus any late fees that accrued. Typically, the lender may also require you to pay repossession charges prior to releasing the car to you. In other states, you could be required to repay the entire loan to obtain your car back. This procedure is known as redemption. Not every state allows for reinstatement. If your state does not have reinstatement laws and it isn’t built into your contract, you must nevertheless contact your lender. It may be willing to amend 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 potentially discover solutions. 1. If a borrower fails to pay, your lender can repossess the car as soon as you are in default — and to to a debt collection agency. The number of missed payments that are required to be in default on your loan is determined by your state as well as your loan contract. In certain situations, you will only need to miss one payment for you to become in default. In other instances you may need to miss two or three payments in order for an issue to occur. In this situation, clear contact to your lender is crucial. If it’s possible to work out an extension, now is the time to ask. 2. Lender repossess your car once you are in default Your lender could or might not send you a notice of its intention to take possession of the car. Contact your lender to inquire about an arrangement for a short-term payment to avoid repossession in the event that you are sent a notice. Depending on your state, the lender may be able to repossess your car at any time , whether or not you’ve received a notification. 3. Lender sells the vehicle Once the lender has taken possession of the vehicle, it could hold onto the vehicle until you pay up on the loan. However, the most likely outcome would be the lender will sell the vehicle. In certain states, the lender will notify you of the sale and offer you the chance to reinstate your loan. If you decide to purchase the vehicle back prior to the sale, you’ll need to pay for the entire amount due and any costs associated with repossession. Many repossessions are auctioned off. You are entitled to be there and place a bid on your vehicle. 4. Lender sends your bill for any deficiency After selling the vehicle, the lender has to use the funds to pay the debt you owe. But the sale price could not be enough to cover your entire debt. If you owe more than what your lender gets in exchange for selling the car, that’s an indeficiency. Unfortunately, in many states, your lender can claim any deficiency. For example, let’s say you owe $10,000 but your lender is able to sell it at $7,000. In this scenario the amount owed is $3000, and the lender may have the right to pursue you for the difference. In the event of a surplus from the sale, the lender might be required to transfer the money to you. It’s not common, but if it does occur, you’ll probably get a little gain from the sale. Other ways to avoid repossession Refusing repossession is a top priority for most consumers. After all, your vehicle is probably a crucial part of your ability to earn a living. Some ways to avoid repossession include Reestablishing the loan If you be current with your past due payments, the lender will allow you to reinstate your loan. Essentially, that means you are bringing the situation back to the beginning. Once reinstated, you’ll need to keep making the regular payments to your car. Make sure you pay off the loan: Of course the process of paying off your entire auto loan is a lot easier to say than do. But if this option is within reach, it is one solution to avoid this. Refinancing: This can be 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 to manage your finances. Declare bankruptcy. If you are behind on other bills, bankruptcy may be an alternative. However, while there are methods to avoid bankruptcy , it’s not a guarantee. Possession could still occur in the event that you fail to come up with a viable solution. The disadvantage of this option is that you’ll need to come up with some amount of cash to resolve the situation. In the end, if you’re facing the uneasy prospect of repossession, talk to your lender immediately. With open lines of communication, 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 on a variety of subjects, including savings, banking, homebuying, homeownership and personal finance. Edited by Rhys Subitch Edited by Auto loans editor Rhys has been editing and writing for Bankrate since late 2021. They are enthusiastic about helping readers gain confidence to manage their finances through providing concise, well-studied and well-researched content that breaks down complicated subjects into bite-sized pieces.
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