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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 goal is to help you make better financial decisions by offering you interactive tools and financial calculators as well as publishing objective and original content, by enabling users to conduct research and compare information for free to help you make financial decisions with confidence. Bankrate has agreements with issuers including, but not restricted 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 can affect the way and where products are displayed on this website, for example for instance, the order in which they appear within the listing categories, except where prohibited by law. Our loans, mortgages, and other home lending products. This compensation, however, does not influence the information we provide, or the reviews you see on this site. We do not include the universe of companies or financial offers that may be available to you.
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4 min read published April 22, 2022
Authored by Kellye Guinan. Written by Personal and business finance contributor
Kellye Guinan is a freelance editor and writer with more than five years ‘ experience within personal finance. She is also a full-time employee at her local library, helping the community gain access to information on financial literacy, in addition to other topics.
Edited by Rhys Subitch Edited by Auto loans editor
Rhys has been editing and writing for Bankrate since late 2021. They are committed to helping readers gain the confidence to take control of their finances with precise, well-researched and well-written data that digests complicated topics into bite-sized pieces.
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A default could occur as a result of just one late payment, but in most cases it’s not a problem. Auto loans aren’t charged until you cease to pay for multiple months — up to 120 days, generally. The lender will likely give you a notice of default prior to repossessing your vehicle. In some states, you’ll have the option of repaying what you owe. However, this may not be the case in all states. Between repossession and default there are several ways to avoid your vehicle to be taken. 6 ways to avoid repossession If you’re in default, or at risk of it, repossession is a real possibility. To avoid it, you’ll need to stay in contact to your lender and also restructure your financial affairs. 1. Keep in touch and keep in contact with the lender Make sure you keep your lender up-to-date on your current situation, your ability to pay and overall financial situation. Keep a record of every interaction, including the name and the title of every person you talk to and then send all letters via certified mail so you have evidence the efforts you’ve made. Lenders would prefer to have their customers pay back their car loans instead of repossessing their cars. Be prepared to provide proof of your financial situation. If something changes notify your lender know right away. It is important to be courteous but firm when discussing the potential of repossession. You want to avoid it at all cost, so keep asking up the management line until you can find someone to assist you with your loan. 2. Request an loan modification. Repossession is a significant danger for the lender and the lender, too. The lender will have to pay off the loan and then hire a person to seize the car to store it elsewhere and then sell it at auction. Because of this it could be beneficial to approach the lender for a reduced payment. Your lender will likely be able to delay 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 discuss the date and time you’ll be able to make repayments. The lender is not under any legal obligation to alter the terms of the terms of your loan but they could help you and your lender avoid a lot of the hassle that repossession can cause. 3. Be current on the loan If you are able pay your loan in full and charges and ask the lender to reinstate your loan. This will stop the default process and is the most efficient way to . This is fine to decline this option if it isn’t available to you. For the majority of people who are facing repossession, paying off the loan isn’t possible. There are 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 auto loan is too much each month, you may sell your car privately . If you’re not upside down on your loan which means you owe more than it’s worth, you can move to a cheaper ride. Ensure that selling your car will cover the payoff sum of your loan and any fees that you owe. If not do that, try negotiating to your lender and see if they could permit you to reduce fees. The most important thing to remember is that selling your car might not leave you with enough of money to make a downpayment to buy another car. If you are in between repossession, selling the vehicle or surrendering it the car, you’ll be left in a position of no transportation, regardless of. Selling your car will keep your credit score intact, however it could result in a situation similar to repossession. 5. Refinance your loan The extension of your loan duration or lowering the rate of interest can make an auto loan less expensive. Unfortunately, if you have missed multiple payments or have fallen behind, you likely don’t have the credit to . That does not mean that you should not attempt. Credit unions and online lenders, as well as some local banks that are small, are more accommodating in their requirements. Keep in mind that financing applications can affect your score on credit, which is why make sure to apply for several loans simultaneously to prevent multiple hits. You might not be able to lower the interest rate, but prolonging your loan term is a possibility. This can allow your monthly installments to be less expensive. However, this means that you’ll pay more in interest overall. It could be worth the extra cost to prevent repossession, but it should be done only after you’ve exhausted other options. 6. Give up 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 ways to get around however it won’t count as repossession — although your credit score will be affected. When you do it, your lender will go through a similar process as repossession. They will take over and then sell your vehicle at auction. If the sale price covers the amount you owe, then you are in the clear. If not, you will be held accountable for the remainder of the loan amount, as well as any charges you’ve accrued. What happens when you default on your auto repossession works Once you are in default the lender is entitled to take possession of your vehicle. Unless the law of your state says otherwise, repossession does not require an announcement or warning. That means that you can lose your vehicle anytime after you’ve defaulted. If your car is repossessable, your lender may give you details about the auction in which your car will be sold. If not, you might be able to renew your loan by catching over the outstanding amount and any fees for repossession. Like everything else in repossession, the information the lender has to provide you will depend on the state in which you reside. Next steps Repossession will remain visible on credit reports for years and make it harder to get a new auto loan. Make sure you are on top of every step of the process and contacting your lender and doing all you can to prevent repossession. While not all options is available but they’re worth a try when you’re facing losing your vehicle. Find out more
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Written by Personal and business finance contributor
Kellye Guinan is a freelance editor and writer with more than five years ‘ experience within personal financial matters. She also works full-time as a employee at her local library, helping people in her community get information about financial literacy, as well as other topics.
The edit was done by Rhys Subitch Edited by Auto loans editor
Rhys has been editing and writing for Bankrate since the end of 2021. They are dedicated to helping their readers feel confident to take control of their finances through providing precise, well-studied facts that break down otherwise complicated topics into bite-sized pieces.
Auto loans editor
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