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Can you repay your 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 smarter financial decisions by providing you with interactive financial calculators and tools, publishing original and objective content. We also allow users to conduct research and compare information at no cost – so that you can make sound 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 Profit The offers that appear on this site are from companies who pay us. This compensation may impact how and when products appear on the site, such as for instance, the order in which they be displayed within the categories listed in the event that they are not permitted by law. This applies to our mortgage or home equity products, as well as other products for home loans. But this compensation does have no impact on the information we provide, or the reviews that you see on this site. We do not include the vast array of companies or financial deals that could be available to you. Srinrat Wuttichaikitcharoen/EyeEm/Getty Images

5 minutes read. Published November 28th, 2022.

Sarah Sharkey Written Sarah Sharkey Written by Contributing Writer Sarah Sharkey is a contributing writer for Bankrate. Sarah writes on a variety of subjects, such as savings, banking, homebuying, homeownership and personal financial matters. Editor: Rhys Subitch Edited By Auto loans Editor Rhys has been editing and writing for Bankrate since late 2021. They are passionate about helping readers gain confidence to control their finances with detailed, well-studied facts that break down complex subjects into digestible pieces. The Bankrate promise

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We receive compensation for the promotion of sponsored goods or services, or through you clicking specific links on our site. This compensation could impact how, where and in what order products are displayed within the categories of listing, except where prohibited by law. This is the case for our mortgage, home equity and other products for home loans. Other factors, such as our own website rules and whether or not a product is available within your region or within your personal credit score can also impact how and where products appear on this site. Although we try to offer an array of offers, Bankrate does not include information about each credit or financial products or services. Car repossession has increased rapidly in the last few years, as per reports . If you fall behind on your payments and your vehicle is at risk of repossession The good news is that you can take steps to stop this unfortunate conclusion. From reinstatement to loan modification There are a variety of options to prevent repossession. Do paying off a vehicle loan stop the repossession process? The rules of repossession vary according to the state you live in. In most states there is a possibility that the lender may take possession of the vehicle when you are in default. Depending on your loan agreement, that could mean missing only one payment. There are many steps between missing a payment to the eventual repossession of your car. Based on the situation you’re in you’re able to take proper steps . If you’ve never received any notice that you are unable to make your car payment, you’ll probably know about this financial fact before your lender will. Instead of waiting for the lender to know that you miss a payment make sure you call the lender to explain the situation. The lender might be willing hear you out to save the cost of repossession. Make an effort to find an acceptable solution. For example, you could offer more information about your situation, including when you’ll be able to make the next installment or what you’re able to pay now. Depending on your history with the lender and your credit score, you may be able to work out some sort of temporary reprieve, or . This is particularly true if this is the first time you have been in the habit of missing a payment. When the lender has not sent notice, a lender can legally repossess your car without or with notice in a variety of states. However, your lender is likely to send you a notification of its intentions to repossess the vehicle before it actually occurs. If you receive an official notice of repossession, your first contact you must be making is with your lender. Again, an open dialogue between you and your lender could lead to the resolution that stops repossession. Waiting until you receive an email means you’ll be playing catch-up when explaining the issue in front of your lender. If your lender is willing to listen to you out, give the most detailed information you can regarding when you’ll be able to make a payment. You should also indicate how much you have available to put towards a payment now. In the end, it’s in the lender’s best interest to work out an arrangement that is temporary. The business needs to be paid and you’ll probably need your vehicle to go to work. Dependent upon the lender and your past, a temporary agreement is not out of the possible. In the event that your lender has begun the process If the lender has already started the repossession process and you do not be able access your vehicle. In this instance, the reinstatement of your loan — also known as curing the default- could be the best alternative. In some states, you’ll have to pay the full past due amount. This includes all missed payments plus any late fees that have accrued. Usually, the lender will also ask that you pay for repossession costs prior to releasing the vehicle to you. In other states, you might have to pay off the entire loan to obtain your car back. This process is called redemption. Not every state allows for reinstatement. If your state doesn’t have reinstatement laws and it’s not included in the contract, it’s best to nevertheless contact your lender. It may be willing to amend your loan to include it. How auto repossession works Auto repossession can be a painful experience. However, understanding the process will help you work through it and potentially come up with solutions. 1. If a borrower fails to pay, your lender has the right to repossess the vehicle as soon as you are in default and then send it to a debt collection company. The exact amount of missed payments that are required to default on your loan will depend on the state you live in and your loan contract. In some cases you only have make one missed payment for you to become in default. In other instances, you might need to miss two or three payments in order for an issue to occur. At this point, open dialogue between you and your lender is crucial. If you are able to negotiate an extension, now is the right time to inquire. 2. Lender repossess your car once you’re in default, your lender may or not notify you of its intention to take possession of the vehicle. Contact your lender to ask for an interim payment plan to avoid repossession in the event that you receive an official notice. Based on the state you live in and the state of your car, the lender could be able to take possession of your vehicle at any time , regardless of whether or not you’ve received a notice. 3. Lender sells the car once the lender has taken possession of your vehicle, it could hold onto the car until you are caught up with the loan. However, the most likely outcome is that the lender will eventually sell the car. In several states, the lender must notify you of the sale and offer you the chance to reinstate your loan. If you wish to purchase the car back before the auction, you’ll need to pay for the entire amount due and any costs associated with repossession. However, many repossessions are auctioned off. It is your right to attend the auction and put in an offer for your car. 4. Lender sends your bill for any deficiency . When you sell the vehicle, the lender will use the proceeds to cover what you are owed. But the sale price might not be enough to pay your entire debt. If you owe more than your lender gets for selling the vehicle, it’s a deficiency. Unfortunately, in many states, your lender could sue you for any deficiencies. For example, let’s say that you owe $10,000, however, your lender is able to sell it at $7,000. In that case 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 may be required to pass it on to you. This is rare, but if it does happen, you will at least have a small benefit from the sale. Other methods to avoid repossession Avoiding repossession is a top priority for most consumers. Since your car is likely a key piece of the way you earn an income. Some ways to prevent repossession include reinstating the loan: If you can get current on your past-due payments, the lender will reinstate your loan. This means that you are bringing the situation back to square one. Once reinstated, you’ll need to continue making your usual car payments. Make sure you pay off the loan: Of course, paying off an whole auto loan is easier to say than do. However, if this is in your reach, it is one solution to avoid this. Refinancing can be difficult given your credit score takes the hit when you miss payments. However, if you are able to find an alternative 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 bills, bankruptcy may be an option. Although there are ways to , it’s not a guarantee. Repossession can still occur if you aren’t able to discover a solution that works. The downside to this option is that you’ll probably have to raise some amount of cash to settle the issue. The main point is that if you find yourself staring down the possibility of repossession, which is uncomfortable, talk to your lender promptly. Through open communication and open lines of communication, the lender may offer a deal that is suitable for all.


Written by Contributing Writer Sarah Sharkey is a contributing writer for Bankrate. Sarah writes about a wide range of topics, including savings tips, banking homeownership, homebuying, and personal finance. Editor: Rhys Subitch Edited by Auto loans editor Rhys has been editing and writing for Bankrate from late 2021. They are enthusiastic about helping readers gain confidence to take control of their finances by providing concise, well-studied and well-researched content that breaks down complicated topics into manageable bites.

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