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    How To Avoid Car Repossession

    Most car loans are secured loans, meaning the car is used as collateral. Therefore, if you default on it, the lender has every right to take possession of the car.

    When this happens, you will forfeit the money you have repaid thus far and your credit rating will also take a major hit.

    In this article, we discuss some ways to avoid default. We will also look at different options to safeguard yourself from a deficiency judgement.

    Make Up On Late Payments

    Have you missed your monthly payment? Well, just because you missed it once, it does not necessarily mean that you are in default.

    Most lenders wait for at least 30 days before sending your reports to the credit bureau, while some may do it even if you are one day late on the payment.

    In any case, the lender will notify you, usually in writing, about the loan’s account status.

    What you can do:

    • Check your loan agreement, speak to the lender, and try bringing back the loan to current in order to avoid a repossession.
    • Make the outstanding payment alongside the late fees and other charges, if any,
    • Turn on an autopay feature to ensure that you do not miss any further payments

    Redeem Your Car

    If your car has already been repossessed, you still have the chance to redeem it.

    When you pay off the entire outstanding balance, you will get the car back.

    Here is how it works:

    • Redeeming implies that you have to pay off the total pending amount, including storage costs, repo fee, and attorney fees. Generally, there is not much time to redeem your car once it is repossessed. The right to redemption is only valid until the lender auctions your car.
    • The total amount you pay when redeeming the vehicle might be higher than what the car is worth.
    • However, if the total debt is manageable and the car has substantial equity, it is a good option.

    Reinstate The Loan

    If you are already in default, reinstating the loan can help prevent repossession. Here is how you do it:

    • Make full payments to cover the missed payments including late fees and charges as a lump sum amount.
    • Keep in mind that the right to reinstate the loan depends on your state laws. Moreover, this clause will be mentioned in your loan agreement, so make sure to verify.
    • Reinstating is a one-time only option. Once done, you will not have a second chance if you default again on payments.

    Negotiate With The Lender

    In most cases, lenders are more than eager to hear your out. Hence, it is in your best interest to speak about the problem rather than defaulting on payments.

     You can approach the lender and discuss the possibilities of selling off the car on your own to repay the debt.

    Most lenders agree to this as it helps them save on storage, advertising, and repo costs.

    If you think you can sell the car at the right price to make up for the debt, selling it to an interested buyer can help clear off the debt.

    • If you have run out of repayment options, speak to the lender about surrendering the car. Usually, when you opt for this, the lender will agree to waive off a portion of the loan.
    • If you think that the lender has violated your rights by repossession, you may use a legal attorney for your defense. If proven, the lender will be forced to give the car back, reduce or forgive the pending amount, or redeem the car.


     You may try looking for refinancing options for your current loan, but keep in mind that approval for this depends on multiple factors like your income, credit rating, and debt-to-income ratio.

    • If you get a new loan that has a lower rate than the ongoing loan, you can refinance it and start making fresh payments on the new loan.
    • Refinancing is not a good choice if you are already upside down or close to the end of the term on your current loan.


    In some cases, it might actually be a good idea to file for bankruptcy owing to extreme financial hardships. You can file bankruptcy under Chapter 7 or Chapter 13 of federal law.

    However, keep in mind that filing doesn’t necessarily mean that you will eliminate the debt. It may, however, help put a temporary hold on:

    • Wage garnishments
    • Repossessions
    • Collections on the unpaid debt
    • Lawsuits


    To be clear, there is no way out of an unpaid car loan. Your car acts as collateral, and the lender has the legal right to take possession of it if you default.

    However, there are some strategies that can work for you. The best thing to do is to avoid missing payments in the first place.

    However, if you did, use one or more of the tips listed above to get your car back and on track.