Have your car payments become unaffordable for you? If so, acting quickly and asking the right questions may save you from missing payments, defaulting and eventual repossession your vehicle.
Equity or Upside Down?
If you owe less than the car’s value, you have equity. If you owe more, you have negative equity, which in the car business is known as being “upside down.”
If you are hurting on making your payments while you have positive equity in the vehicle, you have three main options. “Selling the car to a dealership is the best way to save your credit score,” shared Major Insurance, a firm on a mission to save people time, money, and frustration on auto insurance. The loan gets settled, and with luck, you may have cash left over for a new, more manageable finance plan on another car.
A private sale may bring more profit, but without a title deed in hand, this may be more difficult.
The last option is to keep the car by refinancing the loan, but this could cost a lot more in interest. Financing with a bank or credit union may come with lower rates, so be sure to check them out.
If you find yourself upside down on the vehicle, one option is to pay the difference between the owed amount and the value of the car. However, finding a lender to carry over negative amounts on a refinanced loan will be a challenge.
If leasing, peer-to-peer exchange sites exist. If a shopper qualifies and the bank agrees, this option can save defaulting and free you from the remaining payments.
The final option, if keeping the car is vital, is to contact the bank and ask to arrange alternate payment arrangements.
Can’t Make Payments?
The first thing to do is to contact the lender. This is proper etiquette and will make it easier to negotiate new terms. No lender wants to see people default and lose their previous payments and a car. So, there is support available for anyone falling behind with their car loans.
Bank Already Repossessed the Vehicle?
Taking swift action, within two weeks, may allow you to redeem the repo. But it is a costly route. If redeeming is not an option, the car will go to auction. If the vehicle is sold for less than what is owed, the borrower is liable for the outstanding amount as well as the repo fees, the tow truck fees and a repossession on their credit report.
By returning the car to lender before the repo man takes it, you will save some money on tow truck fees. However, lenders and credit reports still see it as a default and repossession. The last thing one should do is try and hide the vehicle from repo men. Technology makes it possible for the car to be found, and in such cases, the consequences will be far worse.
How to Avoid Repossession
“Before buying a car, make sure you have an emergency fund set up for unforeseen circumstances. Plan your budget out before committing to getting car finance. Build up good credit,” stated Major Insurance, founder of the Safe Driver Scholarship. Always be upfront with banks and lenders before missing payments. Support and advice can save your credit report as well as your car.