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(image: https://farm8.static.flickr.com/7860/40075677663_12881e754b.jpg)Are you able to pay off 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 aim is to assist you make smarter financial decisions by providing you with interactive tools and financial calculators that provide objective and original content. We also allow users to conduct research and compare data for free to help you make informed 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 offers that appear on this site come from companies that compensate us. This compensation can affect the way and where products appear on the site, such as for instance, the order in which they may be listed within the categories of listing, except where prohibited by law. This applies to our mortgage home equity, mortgage and other products for home loans. But this compensation does have no impact on the information we publish, or the reviews that appear on this website. We do not cover 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
The article was written by Sarah Sharkey Written by Contributing Writer Sarah Sharkey is a contributing writer for Bankrate. Sarah writes about a wide range of topics, including savings, banking, homebuying, homeownership and personal finance. Written by Rhys Subitch 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 with clear, well-researched information that breaks down complex subjects into digestible pieces. The Bankrate guarantee
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So, this compensation can influence the manner, place and when products are listed in the event that they are not permitted by law. We also offer mortgage or home equity products, as well as other home lending products. Other factors, like our own website rules and whether the product is available in the area you reside in or is within your own personal credit score could also affect how and where products appear on this website. While we strive to provide the most diverse selection of products, Bankrate does not include details about every financial or credit product or service. Repossessions of cars have increased dramatically since 2020, according to reports . If you are in arrears with your payments and your vehicle is at risk of repossession The good news is that you have the option of taking steps to prevent this dreadful outcome. In between reinstatement as well as loan modification, there are multiple opportunities to prevent repossession. Can paying off a car loan prevent repossession? The rules for repossession differ based on the state you live in. In many states there is a possibility that the lender is able to take the vehicle when you are in default. Depending on your loan agreement, that could be a result of missing just one payment. There are many steps between missing a payment to the final repossession of your car. Based on your current situation, you can take the appropriate actions . If you've not received any notification that you can't make your car payment, you'll probably know about that financial reality well before your lender is aware. Don't wait for your lender to find out when you don't pay take the initiative and contact the lender to discuss your situation. The lender might be willing to listen to you in order to save the cost of repossession. Make an effort to find an acceptable solution. For example, you could give more details regarding your circumstances, such as when you will be able to make your next installment or what you're able to pay now. Based on your past relationship with the lender and your credit score, you may be able to negotiate a temporary reprieve or . This is especially true in the case of this being the first time that you've had to make a missed payment. When the lender has not sent notice, a lender is legally able to repossess your vehicle with or without notice in many states. But your lender will likely mail you a notice of its intention to take possession of the vehicle prior to when it actually happens. If you get notice of repossession the first phone call you need to be making is with your lender. Again, an open line of communication between you and your lender may result in an option that prevents repossession. Waiting until you receive a notice means that you'll have to catch up when you explain the issue to your lender. If your lender is willing to listen to you out, give as many details as possible about when you can make a payment. Additionally, let them know how much money you have available to put to make a payment now. Ultimately, it can be in the lender's best interest to work out a temporary arrangement. After all, the business needs to be paid and you'll likely require your car to get to work. Dependent upon the lender and your personal history, a temporary agreement is within the possibility. If the lender has begun the process. If the lender has already started the repossession process, you may not have access to your vehicle. At this point, reinstatement to your loan (also known as resolving the defaultmay be the best alternative. In some states, you'll need to pay the entire past-due amount. This includes any missed payments along with any late fees that have accrued. Typically you will find that the lender will also ask you to pay repossession charges prior to releasing the car to you. In other states, you might need to pay the entire loan to obtain your car back. This procedure is called redemption. Not every state allows for reinstatement. If your state doesn't have laws governing reinstatement and it's not included in your contract, you should nonetheless contact your lender. They may be willing to modify the terms of your loan so that it includes it. How auto repossession works Auto repossession can be a painful experience. But understanding the process can aid you in navigating it and potentially discover an answer. 1. If a borrower fails to pay, your lender has the right to take possession of the vehicle when you're in default -- and also to send it be able to transfer the vehicle to a debt collection agency. The number of missed payments needed to be in default on your loan will depend on the state you live in as well as your loan contract. In certain situations it is only necessary make one missed payment for you to be in default. In other cases you may need to be late by two or three times in order for an issue to occur. At this stage, open dialogue to your lender is vitally important. If it's possible to negotiate an extension, now is the right time to inquire. 2. Lender repossess your car once in default, your lender may or not give you notice of its intention to take possession of the car. Call your lender to inquire about an arrangement for a short-term payment to avoid repossession in the event that you receive an official notice. Depending on your state the lender could be able to repossess your car anytime -- whether or not you've received notice. 3. Lender sells the vehicle Once the lender has possession of the vehicle the lender may hold the vehicle until you pay up with the loan. The most likely scenario is that the lender will sell the vehicle. In several states, the lender will notify you of the sale and give you the chance to re-establish your loan. If you decide to purchase the car back before the sale, you'll need to pay for the entire amount owed and any fees associated with repossession. But many repossessed cars are sold at auction. It is your right to attend and make an offer for your car. 4. Lender will send you a bill for any deficiency After selling the car, the lender must use those funds to pay the debt you owe. But the sale price may not be enough to pay the entire amount owed. If you owe more than what your lender gets for selling the vehicle, it's a deficiency. Unfortunately, in many states the lender can claim any deficiency. For instance, suppose you owe $10,000 but your lender is able to sell it at $7,000. In that scenario the deficit is $3000, and the lender may be entitled to sue you for the difference. However, if there is an excess from the sale, the lender might be required to transfer the money to you. This is rare however, if it does happen, you will probably get a little gain by selling the property. Other methods to avoid repossession The prevention of repossession is the major concern for many people who borrow. In the end, your car is likely a key piece of the way you earn money. Some ways to avoid repossession include reinstating the loan: If you can make your overdue payments and the lender will allow you to reinstate the loan. This means that you are bringing the situation back to where it was. When you are reinstated, you'll need to continue making the regular payments to your car. Take care to pay off the loan Naturally the process of paying off your entire auto loan is a lot easier to say than do. But if this option is in your reach, it is one way to exit this situation. Refinancing: This can be difficult as your credit score suffers a hit from missing payments. But if you can find a new loan with an interest rate that is lower or a regular payments, it might be the right move for your finances. Declare bankruptcy. If you're in debt on other debts, bankruptcy may be an option. Although there are ways to however, it's not a sure thing. Repossession may still happen when you don't find a workable solution. The drawback to this option is that you'll need to come up with the funds to solve the problem. The main point is that if you're faced with the uncomfortable possibility of repossession, talk to your lender as soon as possible. If you are able to communicate with them in a clear manner with your lender, the lender might be able to offer a solution that is beneficial to everyone.
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Written by Contributing Writer Sarah Sharkey is a contributing writer for Bankrate. Sarah writes about a wide range of topics, such as savings tips, banking homeownership, homebuying and personal finance. 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 the confidence to control their finances by providing precise, well-studied information that breaks down otherwise complex topics into digestible chunks.
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