Keep Your Car: How to Stop Repossession
Did you know that about 107 million Americans (almost half the entire population) have an auto loan? This is a 25 percent increase from 80 million Americans in 2012.
Clearly, taking a loan is increasingly becoming the quickest -and often the only – way to have a ride you can call your own.
Sure, taking a car loan has its upsides. For starters, you don’t have to save for what seems like an eternity to finally afford a car, and the monthly repayments are typically manageable if you’re smart with your car choice.
The downside? If you default on the loan, your car will be repossessed.
Is this what you’re facing? Worry not!
Here is how to stop repossession.
Let Your Lender Know Things Aren’t Looking Up
No one takes out a loan hoping for the worst, even though the risk is always there.
Unfortunately, unfortunate things do happen. You could lose your job when you’re only halfway through car loan repayment, or your business could go down. Regardless of the circumstance, a loss of regular income certainly means you won’t be able to keep up with the repayments.
The #1 mistake people in such situations make is to go silent and let the debt pile up.
Depending on the relationship you’ve built with your lender, they could go a month or two without getting in touch with you. But ultimately, they will try to reach out, and if you’re nowhere to be found -perhaps you changed address and phone numbers – they will have no option but to begin the car repossession process.
Don’t make this mistake. Immediately you realize that you won’t be able to keep up with payments, contact your lender and let them know what’s happening.
Even though lenders don’t have a reputation for leniency, you could earn yourself a few more months to get your act together or even work out a different repayment plan. This is how you could potentially stop repossession.
Clear Up the Late Payments
Of course, the best way to stop repossession is to pay up what you owe. If you’re 3 months late, pay up the entire amount, including any late payment charges.
It’s essential to note that this, though, depends on your loan agreement.
If the agreement states that your loan goes into default after you go 2 months without making a payment, then the lender has the right to reject your offer to settle the late payment.
However, if your loan is yet to go into default and you have the funds to pay up what you owe, don’t hesitate to do so.
You Could Sell the Car
Technically, a car purchased on credit isn’t your car until you have repaid the loan in full. Until you settle the loan, your lender remains with the car’s title.
So, how can you sell a car that isn’t yours? Surely, no sane buyer is going to drive away with the car without its title!
There is a way around it.
If you have equity in the car – this means the car’s value is greater than the outstanding loan – selling the car could be an ideal way to stop repossession. As an example, if your remaining loan balance is $5,000 and your car’s present value is $8,000, you can sell the car at this price, pay off the $5,000 and keep the $2,000. Well, not really $2,000 because there are selling costs involved, but you catch the drift.
Once you’ve established that you’ve equity in the car, approach your lender with the idea. Although there is no guarantee the lender will accept the deal, the numbers can make a big difference.
For instance, if you have already repaid a substantial amount of the loan – say 75 percent – and the car has a decent market value, they will be inclined to give a go ahead. After all, they get to recoup their money immediately, which eliminates the risk that comes with expecting future payments.
Refinance the Auto Loan
In a layman’s language, refinancing a loan is taking a new loan to repay an existing loan – but the new facility usually comes with terms (lower interest rates and a longer repayment period) that could suit your current financial situation.
As such, refinancing your car loan could be an ideal way to stop repossession, especially if you have equity in the car.
When refinancing, keep the following things in mind:
- Does refinancing get you a lower interest rate?
- Does the new loan require an upfront payment?
- Does the refinance come with penalties such as refinance fees?
- How likely are you to default on the new loan?
Depending on your answers to these questions, you can then decide whether the option is good for you.
Generally, though, refinancing means you will end up spending more money in the long term. But our goal here is to stop repossession of your car, not help you make a saving, right?
File for Bankruptcy
Filing for bankruptcy is no light decision. A bankruptcy will stay on your credit report for no less than 7 years, effectively making it 7 times harder for you to rebuild your credit.
But when push comes to shove, you can go for it to stop repossession. Perhaps the car is your sole means to earn a living, and you absolutely can’t do without it.
Even though bankruptcy will not wipe out your car lone, it does prevent creditors from coming after your possessions for a certain period of time. Take this time to reorganize your finances and strategize on how to repay the car loan.
As we said, filing for bankruptcy is a momentous decision. It’s advisable to get a bankruptcy lawyer to advise you on whether bankruptcy is the right move for you, identify the type of bankruptcy you should file, and handle the paperwork on your behalf.
Final Thoughts on How to Stop Repossession of Your Car
Going in for a car loan can be a smart step, especially if the car will make your life easier and help you make more money.
However, if you’re unable to repay the loan, the lender will seek to repossess the car. With the information fleshed out in this article, you now know the steps you can take to ensure you don’t lose your car to repossession.
If you have any questions or wish to share your thoughts, do so in the comments section below. You can also contact us to speak with an attorney.