Repossession Of A Vehicle
Repossessing your car from the finance company can happen when the customer falls behind on payments or does not abide by the terms of the financing agreement. The finance company will typically first try to collect the overdue payments and penalties. If these efforts fail, then the company has the right to take back the car. This is why it is important for a customer to understand the terms of their agreement before entering into any kind of car loan.
When the car loan is secured or collateralized against the vehicle, then the finance company can exercise its right to repossess the car. That is, the lien on the car remains with the finance company, until the loan is paid off. In such cases, if the customer fails to make payments, then the finance company is allowed to take back the car, to cover its losses.
It can be a harrowing experience when a person is faced with having his/her car repossessed by the finance company. It is not only an embarrassment and a financial loss, but also a major inconvenience. Fortunately, there are ways to prevent a car loan from being repossessed and also to recover a vehicle that has already been taken back by the finance company.
The first step is for a person to be aware of the exact terms of the financing agreement and ensure timely payments. It is also important to keep regular communication with the finance company. If payments cannot be made on time, then the customer can seek a deferment or renegotiation of payment terms. A customer should also be aware of the legal process that initiates the repossession of a car.
It is important for a customer to seek help if a vehicle is about to be repossessed. There are different organizations like credit unions, financial counseling agencies and legal aid providers that can help. They can provide assistance in refinancing the loan or finding other methods to cover the car payments. In case of repossession, they can also
help in recovering the car.
Purchasing Back The Vehicle
Once a vehicle is repossessed, its status changes to ‘repo’ and it is offered for sale to recover the loan amount. However, the customer can purchase back the vehicle if they are able to pay off the remaining balance of their loan. What is important to remember is that the customer has to pay off the loan amount in full, plus additional fees and penalties associated with the repossession.
The finance company typically considers a repossessed car a used vehicle, which means that it can auction the car off at a much lower price than its original sale price. This can reduce the amount that the customer has to pay to get the car back. Moreover, the customer might have to pay for any damage incurred to the car, such as when it was repossessed, if applicable.
It is best to act fast when attempting to purchase a vehicle back. This is because repo cars are usually auctioned off fairly quickly. There is also the possibility that someone might purchase the car before the original owner has a chance to reclaim it. In such cases, the finance company can still collect money from the first owner before selling the car to a new buyer.
When Is Repossession Not An Option?
In some cases, a customer majority end up having their loan discharged. This means that the debt is written off and the finance company is no longer able to repossess the vehicle. In order for this to happen, the customer must file for bankruptcy protection. Bankruptcy policies vary from state to state, so it is important for a customer to get all the information ahead of time.
In addition, if the loan has been taken out for a period of longer than five years, and the customer no longer owns the car that was secured for the loan, then the finance company may be unable to repossess the car. In such cases, the customer may be allowed reprieve from repaying the loan.
Adverse Impact Of Repossession
Even if a person successfully purchases the vehicle back after it has been repossessed, their credit report and score will take a huge hit. This can remain on the report for up to seven years and make it very difficult for a person to qualify for a loan in the future. Moreover, the rates for loans, credit cards and insurance can significantly increase after a repossession.
Repossession is a very serious matter. It can have both financial and legal consequences. The first step for a customer to take is to understand the details of the financing agreement with the finance company. It is also important to stay in constant communication with the lender and be proactive in finding solutions.
Rebuilding Credit After Repossession
Although one’s credit score might take a serious hit because of repossession, there are measures that can be taken to rebuild it. The best option is to take out a secured credit card and make regular payments. This will show that a person is capable of making regular payments, and the credit score will slowly improve.
Creating a monthly budget can also help a person stay on track with their payments. Having a strong credit score is important when it comes to qualifying for loans, mortgages and other financial agreements, so it is important to take the necessary steps to rebuild it.
Ignoring A Loan After Repossession
Once the vehicle is repossessed by the finance company, a customer may be tempted to just ignore the remaining debt. This can have very serious consequences, such as a lawsuit and garnishments of wages. That is why it is important for a customer to reach out to the finance company and to make arrangements to settle the debt.
The best option is to communicate with the finance company to get the debt forgiven. A customer can try to negotiate a settlement, which basically involves offering the finance company a lesser amount than the total amount due. This is often the best option, as the customer will be able to avoid any legal action.
When To Get Professional Help
Managing the financial aspects of a repossession can be a complicated task. That is why it is important to get the help of experts to deal with the situation. The financial counseling agencies, bankruptcy attorneys and debt relief services can be of great help in understanding the legal aspects and creating a repayment plan.
Moreover, it is important to approach lenders that specialize in repossessed cars. Although such lenders typically offer loans with high interest rates, they are a great option for customers who have been through a repossession and want to rebuild their credit. Last but not least, it is essential to look for resources such as grants and government programs that can help in settling the debt.
