Possible reasons why your car was repossessed
It is important that you read your loan contract, as this will tell you the circumstances in which car repossession can take place.
It will also let you see if they have to advise you through a court or if this isn’t necessary.
The most common reason this happens is that you have defaulted on the loan. Again, the contract will tell you what constitutes a default.
Most typically, the lender will take this action if you have failed to make the monthly repayments on time.
The vehicle is the lender’s security and gives them the guarantee that they won’t lose money if you stop paying them back.
Therefore, they may move swiftly to carry out car repossession even if you have only missed one or two payments. They want to make sure that they don’t lose money.
Another reason is that you may have failed to comply with some other requirement of the loan.
A good example here is if you haven’t taken out auto insurance on the vehicle. In this case, the lender will be worried about losing money if you have a serious accident without any cover.
How to prevent repossession
As we have seen, the key is in understanding when repossession could take place. Take the time to read your contract and see in what circumstances this could happen.
You will then want to ensure that you stick all of the terms and conditions that are stated.
Paying on time is the most critical point. You need to check how many missed payments could trigger repossession.
However, be careful to read through other points such as the need for insurance. This will allow you to avoid the lender having to take this action.
If you fall behind on payments or default in some other way, don’t just wait and hope. You need to take action to avoid car repossession taking place.
This means getting in touch with the lender and explaining the situation. They should try to help you find a way to avoid the car being repossessed.
Here is what you should do if your car gets repossessed
You are sure to be shocked and upset if your vehicle gets repossessed. However, don’t get angry at the people taking away the car or at your lender.
The first step is to find out the exact situation.
How much do you owe them, and are they planning to sell the vehicle at an auction? It is possible that you will still owe money on the loan even after the auto has been sold?
This is now a problem to be resolved, which can be done in the following ways:
- Bring the loan up to date- You may be able to reinstate the loan by paying off the arrears. This can be done in certain US states. The repossession costs will also be charged to you. From now on, you need to be certain that you don’t fall behind with the repayments again.
- Pay off the full loan- This is known as redeeming. It means that you pay off the entire outstanding loan as well as the repossession costs. When it is a loan that doesn’t have long left to run, this may be an option.
- Take out insurance- If a lack of insurance has caused this situation, you need to arrange this cover. You will still be charged the car repossession costs, and you should keep on paying your loan until everything is sorted out.
- Bid for it at an auction- If the lender puts the auto up for auction, you can go along and bid for it. Remember that you will still be responsible for paying back any deficiency that is still owed on the loan after this transaction is completed.
- File for bankruptcy- Is your default on this loan a sign of greater financial worries? If it is, you may decide that this is the right time to file for bankruptcy. One of the effects of doing this is that the lender will need court permission to sell the vehicle. This may give you some extra time to pay off what you owe on it.
By taking the right steps, you can stop car repossession from becoming a bigger headache.
However, it is far better to do everything possible to avoid it happening in the first place.