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How to avoid repossession on a late car loan Advertiser Disclosure Advertiser Disclosure We are an independent, advertising-supported comparison service. Our mission is to help you make better financial decisions by offering you interactive tools and financial calculators, publishing original and objective content. This allows you to conduct your own research and evaluate information for no cost - so that you can make informed 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 Money The deals that are advertised on this site are from companies that pay us. This compensation may impact how and where products are displayed on this website, for example the order in which they may be listed within the categories of listing in the event that they are not permitted by law. Our loans, mortgages,, and other products for home loans. However, this compensation will have no impact on the content we publish or the reviews that you see on this site. We do not include the entire universe of businesses or financial offerings that could be open to you.
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4 min read Published April 22nd, 2022
Writer: Kellye Guinan. Written by Personal and Business Finance Contributor
Kellye Guinan is a freelance editor and writer with over five years ' experience within personal finances. She's also a full-time librarian at the local library, where she assists people in her community get information on financial literacy, in addition to other topics.
Editor: Rhys Subitch Edited by Auto loans editor
Rhys has been writing and editing for Bankrate since late 2021. They are passionate about helping readers gain the confidence to control their finances with clear, well-researched facts that break down otherwise complicated topics into bite-sized pieces.
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Default can happen after just one late payment, but in most cases it's not a problem. Auto loans won't be charged off until you stop paying for a period of time -- up to 120 days in most cases. Your lender will likely send you a notice of default prior to repossessing your car. In certain states, you'll have the opportunity to pay back what you owe, although this isn't always the case. Between default and repossession, there are a few tactics to prevent your car from being taken. 6 ways to avoid repossession If you're currently in default or at threat of it repossession is a very real possibility. To stay out of it, you'll have to remain in close contact to your lender and also restructure your financial affairs. 1. Stay in contact and keep in contact with the lender Keep your lender up to date on your situation, ability to make payments and overall financial situation. Document every interaction, including the name and title of each person you talk to, and send any letters through certified mail to provide evidence the efforts you've made. Lenders would prefer to have their customers pay for their car loans rather than repossess their vehicles. Prepare to submit evidence of your financial condition. If something changes, let your lender know immediately. It's important to be polite but firm when discussing the potential of repossession. You should avoid repossession at any cost and that's why you should keep calling the management line until you get someone to assist you with your loan. 2. Request a loan modification. A repossession is a major chance for the lender as well. The lender will have to take over the loan, hire someone to take possession of the vehicle to store it elsewhere and then sell it at auction. In this case it could be beneficial to ask the lender for a reduced payment. Your lender is likely to be able to defer the payment for a couple of months or change the loan to help you keep up with payments. Inform your lender know the details of your situation , and then discuss the time and method by which you'll be able to pay back. Lenders are under no legal obligation to alter your loan but they could save you both a lot of the stress that repossession causes. 3. Be current on the loan If you are able pay your loan in full and fees in order for the lender to reinstate the loan. This will end in the process of default and it is an efficient way to . It is okay if this option isn't available to you. For most people facing repossession, getting current on the loan isn't possible. There are some ways to get the money -- such as however, it could create a different kind of pressure on your lifestyle. 4. Sell the car If an car loan is too high each month, you can sell your vehicle privately or . As long as you're not in a position to be over the limit on your loan (when you are owing more than what it's worth -- you could change to a less expensive vehicle. Be sure to sell your car in a manner that will be sufficient to pay off the total amount of your loan as well as any other charges you have to pay. If you can't then, you should discuss the matter to your lender and see if it will allow you to reduce fees. In the end, selling your car won't provide you with the a down payment to purchase another vehicle. When you're between repossession and selling the vehicle or surrendering it the car, you'll be left not able to travel no matter what. Selling your car helps keep your credit score intact, however it could cause you to be in a position that is similar to repossession. 5. Refinance your loan Extending your loan duration or decreasing your interest rate can help make your auto loan cheaper. Unfortunately, if you have been late on multiple payments or have fallen behind, you probably don't have the credit to . However, that doesn't mean you shouldn't consider it. The credit union and the online lender, in addition to some small local banks, are more accommodating in their requirements. Remember that applying for financing could negatively impact your score on credit, which is why be sure to make an application for several loans at once to avoid multiple attacks. You might not be able to lower the interest rate, but prolonging the loan duration is a possibility. This can allow your monthly installments to be less expensive. However, this means that you'll pay more interest in the long run. It may be worth the higher cost to avoid repossession, but it should be done after you have exhausted all other options. 6. Don't hesitate to surrender your car the option of surrendering your car to your lender when you're unable to pay. You will no longer have access to it and you will have to think of alternative options to move around the situation, but it won't be considered a repossession, but your credit score may still decrease. When you do the latter, your lender will undergo similar procedures to repossession. They will take over and then auction off your car. If the purchase price is more than the amount you owe, then you are in the clear. If not, you'll be held accountable for the remainder of the loan amount as well as any additional fees you've accrued. How the auto repossession process works Once you are in default the lender has the right to seize your car. Unless your state law says that it is not required, repossessions don't require an announcement or warning. This means you could lose your vehicle at any time once you've defaulted. If your car is repossessed or seized, your lender could provide you with information about the auction in which your car will be sold. Otherwise, you may be able to reinstate your loan by getting caught over the outstanding amount and any fees for repossession. Similar to every aspect of the repossession process the information that your lender is required to give you will depend on the state in which you reside. The next steps Repossession will stay in your credit file for years and make it harder to get a new auto loan. Make sure you are on top of every step of the process, talking with the lender and doing everything you can to prevent repossession. Although not every alternative is available, they are worth trying when you are up against losing your car. Learn more
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Written by Personal and business finance Contributor
Kellye Guinan is a freelance editor and writer with over 5 years experience working in the field of personal finances. She also works full-time as a librarian at the local library, helping the community gain access to information on financial literacy, as well as other topics.
Edited 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 feel confident to take control of their finances by providing precise, well-studied facts that break down otherwise complicated topics into bite-sized pieces.
Auto loans editor
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