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5 minutes read. Published November 28, 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 banking, savings tips, homebuying, homeownership and personal finances. Edited by Rhys Subitch and edited By Auto loans editor Rhys has been writing and editing for Bankrate since late 2021. They are dedicated to helping readers gain the confidence to control their finances with detailed, well-studied facts that break down complex topics into manageable bites. The Bankrate promise

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We are compensated in exchange for the promotion of sponsored goods and, services, or when you click on certain links posted on our website. This compensation could influence the manner, place and in what order products are listed in the event that they are not permitted by law. We also offer mortgage or home equity products, as well as other home lending products. Other elements, like our own rules for our website and whether a product is offered in the area you reside in or is within your own personal credit score can also impact the way and place products are listed on this site. We strive to provide an array of offers, Bankrate does not include specific information on each credit or financial product or service. Car repossession has increased rapidly from 2020, according to reports . If you fall behind on the payments you have made and your car is in danger of being taken away The good news is that you can take action to stop this unfortunate conclusion. From reinstatement to loan modification, there are multiple opportunities to avoid repossession. Does paying off a car loan end the process of repossession? Repossession rules differ based on the state that you reside in. In most states where repossession is allowed, the lender may take possession of the vehicle as soon as you are in default. Based on the terms of your loan agreement, that could mean missing only one payment. There are several steps from missing a payment up to the final repossession of your vehicle. Based on your current situation you should take the appropriate steps . If you’ve never received any notice that you can’t make your car payment, you’ll probably know about this financial fact before your lender is aware. Instead of waiting for the lender to know that you fail to pay take the initiative and contact the lender to discuss your situation. The lender might be willing to hear you out in order to avoid the costs of repossession. Try to come to an agreeable solution. For example, you can offer more information about your situation, including when you can make the next installment or what you can pay right now. Depending on your history with the lender and your credit score, you may be able to negotiate a temporary reprieve or . This is especially the case if this is the first time that you’ve ever missed a payment. If the lender has sent only notice to you, the lender is legally able to repossess your car with or without notice in a variety of states. However, your lender will likely mail you a notification of its intentions to repossess the vehicle before it actually happens. If you get notice of repossession your first contact you must contact your lender. Also, a line of communication between you and the lender could lead to an option that prevents repossession. In the meantime, waiting until you get notice of repossession means that you’ll have to catch up when explaining the situation to your lender. If the lender will listen to you out, offer as much information as you can about when you can pay. Additionally, let them know how much money you have available to put to make a payment now. In the end, it’s in the lender’s best interest to negotiate a temporary arrangement. The business is looking to be paid, and you will likely need your car to get to work. Depending your lender and your personal history an agreement that is temporary is within the possible. In the event that your lender has begun the process, if you are the lender has already started the repossession process it is possible that you will not have access to your vehicle. In this case, restitution or restitution of the loan (also known as curing the defaultmay be the best possible outcome. In some states, you’ll be required to make payments for the entire due amount. This includes all missed payments and any late fees which have accrued. In most cases the lender will also require you to cover repossession fees prior to releasing the car to you. In other states, you might have to pay off the entire loan to get 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 a part of your contract, you should still reach out to your lender. It might be willing to alter your loan so that it includes it. How auto repossession works repossession is an unpleasant experience. But understanding the process can aid you in navigating it and eventually come up with solutions. 1. Borrower misses payments Your lender has the right to repossess the car when you’re in default — and then to a debt collection agency. The exact number of missed payments needed to default on your loan depends on your state and the terms of your loan contract. In some cases it is only necessary make one missed payment for you to be in default. In other instances it is possible to miss two or three payments to cause an issue. At this stage, open contact with your lender is vitally important. If you are able to negotiate a reprieve, now is the time to ask. 2. Lender takes your car Once you are in default the lender could or might not give you notice of its intention to repossess the car. Contact your lender to ask for a temporary payment arrangement to avoid repossession if you are sent an email. In the event of a state-wide restraining order and the state of your car, the lender could be able to take possession of your vehicle at any time — whether or not you’ve received a notice. 3. Lender sells the vehicle once the lender has possession of the vehicle the lender may hold the vehicle until you pay up on your loan. The most likely scenario would be the lender will decide to sell the vehicle. In several states, the lender must notify you about the sale and provide you the chance to re-establish your loan. If you want to buy the vehicle before the auction, you’ll need to pay for the entire amount due and any repossession expenses. But many repossessed cars are sold through auction. You have a right to attend and make an offer for your car. 4. Lender will send you a bill for any deficiency . When you sell the car The lender has to use the funds to cover what you owe. However, the amount you paid for the vehicle could not be enough to cover the entire amount owed. If you owe more than what your lender receives for selling the vehicle, it’s a deficiency. And unfortunately, in most states you can be sued by your lender could claim any deficiency. For instance, suppose that you owe $10,000, however, your lender will only offer it for $7,000. In this scenario, the deficiency is $3,000 and the lender may have the right to claim the difference. However, if there is a surplus from the sale and the lender may be required to distribute it to you. It is not a common scenario, but if it does happen, you will at the very least get a tiny gain of the transaction. Another method to avoid repossession is to use the following strategies. Refusing repossession is a top priority for most consumers. Since your car is likely a key piece of the way you earn a living. Some ways to prevent repossession include reinstating the loan: If you can get current on your past-due payments, the lender will allow you to reinstate your loan. This means that you’re bringing the matter back to the beginning. When you are reinstated, you’ll need to continue making your regular car payment. Make sure you pay off the loan Then, paying off an whole auto loan is easier said than done. If this is possible, it is one way to exit this situation. Refinancing is challenging as your credit score suffers a hit from missing payments. However, if you are able to find the right loan with a lower interest rate or regular payments, it might be the right move to manage your finances. Declare bankruptcy. If you’re in debt on other bills If you are in debt, bankruptcy could be an alternative. However, while there are ways to , it’s not a guarantee. Repossession can still occur when you don’t come up with a viable solution. The disadvantage of this option is that you’ll likely need to come up with an amount of money to settle the issue. The bottom line If you’re facing the possibility of repossession, which is uncomfortable, talk to your lender promptly. If you are able to communicate with them in a clear manner and open lines of communication, the lender may offer a deal that is suitable for all.

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

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