Are you able to pay off the car loan in order to avoid repossession? Advertiser Disclosure Advertiser Disclosure We are an independent, advertising-supported comparison service. Our mission is to help you make better financial choices by offering interactive tools and financial calculators, publishing original and objective content. This allows users to conduct research and compare information for free and help you make informed financial decisions. Bankrate has partnerships with issuers, including but not restricted to, American Express, Bank of America, Capital One, Chase, Citi and Discover. How We Earn Profit The products that are featured on this website are provided by companies that compensate us. This compensation may impact how and where products appear on the site, such as such things as the sequence in which they be displayed within the categories listed in the event that they are not permitted by law for our mortgage, home equity and other home lending products. But this compensation does affect the content we publish or the reviews you read on this site. We do not include the universe of companies or financial offerings that might be accessible to you. Srinrat Wuttichaikitcharoen/EyeEm/Getty Images
5 min read . Published November 28th, 2022.
Written by Sarah Sharkey Written by Contributing Writer Sarah Sharkey is a contributing writer for Bankrate. Sarah writes about a wide range of subjects, such as savings, banking homeownership, homebuying and personal finance. Editor: Rhys Subitch Editored by Auto loans Editor Rhys has been editing and writing for Bankrate since late 2021. They are dedicated to helping readers gain confidence to control their finances by providing concise, well-researched and precise information that breaks down complex subjects into digestible pieces. The Bankrate promises
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Between reinstatement and loan modification you have a number of opportunities to prevent repossession. Can paying off a car loan stop the repossession process? The rules for repossession differ depending on the state you live in. In many states, the lender is able to take the vehicle at any time you are in default. Depending on your loan agreement, that could mean missing 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 current circumstances you should take the appropriate steps . If you’ve not received any notification that you can’t make your car payment, you’ll likely know about the financial situation well before your lender will. Don’t wait for your lender to discover that you fail to pay take the initiative and contact the lender to explain your situation. The lender may be willing to take your concerns into consideration in order to avoid the costs of repossession. You should try to reach a reasonable solution together. For example, you can provide more details about your circumstances, such as when you will be able to make your next payment or what you can pay right now. Depending on your history with the lender and your credit score, you may be able to negotiate an interim reprieve or . This is especially the case when this is the first time you’ve been in the habit of missing a payment. In the event that your lender has only sent notice, a lender may legally take possession of your car with or without notice in a variety of states. However, your lender will likely send you a notice about its intention to repossess the vehicle before it happens. If you are given a notice of repossession, the first phone call you need to contact your lender. A clear dialogue between you and the lender could lead to the resolution that stops repossession. If you wait until you receive an email means you’ll be caught up when you explain the issue with your lender. If the lender will listen to you out, give as much information as you can about when you can make a payment. Also volunteer how much you are able to pay towards a payment in the present. It is in the lender’s best interest to work out an interim arrangement. The business is looking to be paid, and you’ll probably need your vehicle to go to work. Depending on the lender and your history an agreement that is temporary is within the realm of possibility. In the event that your lender has begun 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 instance, the reinstatement to your loan or loan modification referred to as curing the default — could be the best alternative. In certain states, you’ll need to pay the full past due amount. This includes all missed payments and any late fees which have accrued. Typically, the lender may also require you to cover repossession fees before releasing the vehicle to you. In some states, you might 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 doesn’t have laws governing reinstatement and it’s not included in the contract, it’s best to nonetheless contact your lender. It may be willing to amend your loan in order to incorporate it. How auto repossession works repossession is a stressful experience. Understanding the process can help you work through it and eventually come up with solutions. 1. When a borrower is late on payments, the lender is entitled to repossess the vehicle as soon as you are in default, and then to a debt collection agency. The exact amount of missed payments needed to default on your loan depends on your state as well as your loan contract. In certain cases it is only necessary make one missed payment in order to be in default. In other cases, you might need to be late by two or three times in order for an issue to occur. At this stage, open communication to your lender is critically important. If you are able to work out an extension, now’s the perfect time to make an inquiry. 2. Lender repossess your car once you are in default, your lender may or may not notify you of its intention to repossess the vehicle. Call your lender to request a temporary payment arrangement to avoid repossession if you receive an official notice. In the event of a state-wide restraining order the lender may be able to take possession of your vehicle anytime — regardless of whether you’ve received a notice. 3. Lender sells the vehicle once the lender has taken possession of your vehicle It could keep the vehicle until you catch up with your loan. However, the most likely outcome is that the lender will decide to sell the vehicle. In several states, the lender must notify you of the sale and give you the chance to reinstate your loan. If you decide to purchase the vehicle before the auction, you’ll need to pay for the entire amount due and any repossession expenses. But many repossessed cars are auctioned off. You have a right to be there and place an offer for your car. 4. Lender pays you for any outstanding balance. After you sell the vehicle the lender must use those funds to pay the debt you have to pay. However, the price you pay for the car could not cover the entire amount owed. If you owe more than your lender receives for selling the vehicle, it’s an indeficiency. In most states the lender could be able to sue you for any defects. Let’s say for instance that you owe $10,000, but your lender only sells it for $7,000. In this scenario the amount owed is $3,000 and the lender may have the right to pursue you for the difference. If there’s surplus to the sale, the lender could be required to distribute it to you. This is rare however, if it does happen, you will probably get a little profit by selling the property. Other methods to avoid repossession Avoiding repossession is a top priority for most people who borrow. After all, your vehicle is probably a crucial part of your ability to earn a living. Some ways to avoid repossession are: Reinstate the loan If you get current on your past-due payments then the lender will allow you to reinstate your loan. Essentially, that means you are bringing the situation back to square one. Once reinstated, you’ll need to continue making the regular payments to your car. Make sure you pay off the loan Naturally, paying off an whole auto loan is easier to say than do. But if this option is within reach, it is one way to exit this situation. Refinancing is difficult given your credit score is taking a hit from missing payments. If you can locate the right loan with an interest rate that is lower or a regular payments, it might be the right choice to manage your finances. Declare bankruptcy. If you are behind in other charges If you are in debt, bankruptcy could be an option. However, while there are options to do so , it’s not a guarantee. Repossession may still happen in the event that you fail to find a workable solution. The downside to this option is that you’ll probably have to raise the funds to resolve the situation. In the end, if you’re facing the possibility of repossession, which is uncomfortable, talk to your lender as soon as possible. With open lines of communication and open lines of communication, the lender could offer a bargain that is beneficial to everyone.
Written by Contributing Writer Sarah Sharkey is a contributing writer for Bankrate. Sarah writes about a range 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 the end of 2021. They are passionate about helping readers gain the confidence to manage their finances through providing precise, well-studied information that breaks down complicated topics into digestible chunks.
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