Car Repossession

If you have a car on loan, and it the loan is secured against the car, then the lender has the right to use repossession of the car as a means to recover the money lent. That is, of course, if you have failed to keep up with repayments. The article below looks at what might happen if your car is facing repossession, and what you can to to limit the damage, both to your finances and prestige. This article is of more interest to US readers than the UK, where secured car loans are not that common.

Is Your Car Facing Repossession? What Will Happen And How You Can Limit The Damage

If you have a car on loan, as many millions of Americans do, there's a good chance that loan is secured to the car itself. Secured means that, should you default on the loan, the lender has the right to repossess the car. Of course, people do default on loans, often due to unfortunate circumstances such as loss of job or illness.

In the case of a car loan, that could mean "goodbye" to your prize auto. Taken unawares, you could face the embarrassing situation of a tow truck turning up outside your house or place of work, and hauling it away; in front of friends, neighbours, colleagues. thre are not many more embarrassing situations than that.

So, if you have a car on loan, it is best to understand understand your rights. The information below will hopefully help you better understand what steps you need to take, should you face the daunting possibility of repossession.

Preventing Repossession

Preventing a repossession is the best ploy if you are in time to deal with the situation. There is no point wishing the problem will go away if you have defaulted on the loan. It is best to face the problem head on, and contact the lender to discuss your situation.

If you have temporary problems, they may be able to come to an agreement with you to keep the loan going. Repossession is a hassle to them as well as you, so they may be more willing than you think to find a solution. If you don't talk to them, then they would just pursue the repossession.

The lender may allow you a period of grace, or even prepare a new payment schedule that you can stick to. If they do, be sure you get it in writing! If you cannot prevent repossession, it begins to take on a life of its own once it is in process, and is almost impossible to stop. If the lender simply will not co-operate, and you know that repossession is going to happen, then you should consider giving up possession of the car on your own. Why should that be? The reason is, if your car is repossessed, you will not only be responsible for the balance due after the car is sold, but also you will have to pay the costs of the repossession, for example the towing.

The Repossession Process

If you do default on your loan, the lender will have the right to come and take your car away. They may or may not be able to come on your property to do take the car, without advanced notice; that depends on the US state that you live in. They are not allowed to cause a "breach of the peace," while repossessing your car. In other words, they cannot make a big scene, and let everyone nearby know that they are taking your car because you did not make the loan payments!

If you have personal belongings in the car, the lender will likely have to return them to you in good shape, or reimburse you for them should they disappear. Again, the laws vary by state, so be sure to find out what the legal situation is in your state.)

Selling The Car

Once the lender has your car, they will almost certainly try to sell it in order to recoup at least some of the loan balance. By law, they must inform you when, and where, your car will be sold, and allow you the opportunity to buy it back. To buy it back, you will have to pay the total balance due, plus any expenses from the repossession process.

If you feel that the car was not sold responsibly, you then have a right to dispute it. In other words, if you feel that the lender did not try to get an honest price for the car, you should talk to an attorney about your options open to you. Outstanding Balance When the lender sells your car, you will be responsible for the difference between the loan balance and what the car was sold for. For example, if your loan balance was $8,000 and the car sold for $5,500, you would still owe $2,500 to the lender. If you do go through the repossession process, keep a careful record of the entire repossession process.

If you are in front of a judge being sued for the outstanding balance, it will be your only chance to dispute the lender's claim that you still owe them money. If you can prove that the lender acted wrongly, in either the act of repossession or while selling your car, the judge may dismiss that balance.