Financial assistance for car repossession may be a helpful solution for certain consumers having trouble paying back their car loans. However, it’s always best to seek financial assistance before the situation comes to repossession. If you have defaulted on your vehicle loan, there is still a chance to save your car from being repossessed, but you will have to act quickly. In 2022, the average car loan default rate was 2.28% while the average repossession rate was 1.6%.1
Financing a vehicle allows a borrower to pay off their purchase slowly. But if you unexpectedly experience financial difficulties, you may struggle to afford loan payments. If a lender has repossessed your car due to missed payments, learn how to get back a repossessed car.
How Does a Car Loan Work?
When a consumer finances a vehicle, the seller will place a lien on the car title. A lien signifies the lender is the vehicle’s legal owner until the borrower repays the debt in full. Liens offer financial protection to the lender if the borrower fails to meet the debt obligations.
If borrowers stop making payments due to financial issues, they may then default on the loan. The number of missed payments that result in default depends on the financial institution. You can default on your car loan after a few missed payments or just one.
A lender has the legal right to repossess a financed vehicle if the borrower defaults. When a car is repossessed, the lender must hire a towing or repossession company to retrieve the car. Some states require the lender to provide notice before proceeding with a repossession, but not all. A lack of notice means you may one day discover the vehicle missing or getting loaded onto a towing truck.
How To Get a Car Back After Defaulting on Auto Loan or Missing Car Payments
The repossession process is stressful and can completely derail your life. But, if you find yourself in a position where your car has been repossessed, know you’re not alone. Approximately 2.2 million vehicles are repossessed every year.2 If you’re ready to get your car back, know there are three ways commonly used to get a repossessed car back. The best option will depend on your current financial situation. Your options include:
- Redeeming the car
- Reinstating the car
- Purchasing the car at auction
Redeem the Car
Redeeming a car means paying repossession companies the entire remaining loan balance. However, you will also be responsible for paying late fees and repossession costs. Repossession costs include towing fees, storage fees, repair costs, etc. Redeeming the car allows borrowers to get their car back and become debt free.
Reinstate the Auto Loan
If you cannot afford to pay the remaining balance of the car loan, you may reinstate the loan to continue making monthly payments. But before the car loan is reinstated, you will need to pay any missed payments and late fees. In addition, you will have to pay repossession fees for having the car towed and securely stored. Reinstating the loan will help you recover from a car repossession and get back on the road.
Purchase the Car at Auction
If your lender sells your car at an auction, you can bid to get your personal property back. Whether you buy the vehicle or not, you are still responsible for the remaining car payments. If your car sells for less than what you owe at auction, there will be a deficiency balance. A deficiency balance is a monetary difference between the sale price and your outstanding balance. Depending on the state of your vehicle, you may be able to buy and then sell the car for parts to get money quickly.
Possible Financial Aid Solution for a Repossessed Car
|Source of Assistance||Description||Pros||Cons|
|Non-Profit Organizations||Organizations that offer financial help or counseling for those facing repossession.||– Often free or low-cost. – Tailored advice.||– Limited funds. – Might have strict eligibility criteria.|
|Peer-to-Peer Lending||Online platforms where individuals can lend to those in need.||– Flexible terms. – Potentially lower interest rates.||– Requires good credit. – Not instant.|
|Employer Loan Programs||Some employers offer loan programs or advances to employees in financial distress.||– Convenient. – Potentially low or no interest.||– Limited to certain employers.|
|Local Community Programs||Local government or community-based programs offering financial aid or advice.||– Localized support. – May have additional resources.||– Varies by location. – Might have limited funds. |
|Credit Counseling Services||Professional services that offer advice and plans to manage debt and financial challenges.||– Expert advice. – Can help negotiate with lenders.||– Some may charge fees.|
|Online Fundraising||Platforms like GoFundMe allow individuals to raise money for personal challenges.||– Potential to raise significant funds.- Wide reach.||– Requires promotion. – Platform may take a percentage.|
Do You Need a Lawyer To Get Your Car Back After Repossession?
Hiring a lawyer or bankruptcy attorney can cost you thousands of dollars. You may not have to hire a lawyer from an auto lender or repossession company to get your car back. After a car repossession, you will receive a letter detailing your right to redeem or reinstate the car loan.
If you don’t receive a notice about your rights, contact the lender directly and ask them to include a billing statement. The billing statement should have a breakdown of costs for having the car repossessed.
Does a Car Repossession Affect Your Credit?
A car repossession can negatively affect your FICO score and credit report for several years! Failing to keep up with the payment schedule of a loan agreement and getting your car repossessed will lower your credit score quickly.
Payment history accounts for 35% of your credit score, which makes it the most critical factor for calculation. Late or missed payments will appear and stay on your credit reports for up to seven years. You may get subpar loan offers in the future since lenders may consider you a risky borrower. So if you are trying to boost a bad credit score, you will want to improve payment history on your credit report.
When the lender repossessed your car, they reported the incident to the major credit bureaus. Future lenders can see the repossession information through a credit check, which may negatively affect your financial opportunities.
Negative information on your credit report is less than ideal. However, you can still work on getting a good credit score! You can get to tier 1 credit by making all future payments on time, managing debt wisely, and avoiding any more negative information on your credit reports.
How To Afford the Costs of Reclaiming Your Personal Property
You need sufficient money to get your car back after a lender completes the repossession process. If you have fallen behind on auto payments due to unforeseen financial circumstances, there are options available! Your options include:
- Asking a friend or close family member for financial help
- Looking into government financial aid
- Personal loans, like installment loans or bad credit loans
- Getting an additional stream of income, such as a second job
Ask Friends and Family for Help
You can try asking friends and family for financial help if you have a support group. One person may not have enough money to cover all the repossession expenses. Still, you could borrow smaller loans from multiple people. Unlike traditional lenders, friends and family may not charge interest rates or have strict repayment terms.
Seek Government Assistance
Some borrowers fall behind on auto payments because they unexpectedly lost their employment. Losing your job can completely derail your life and cause havoc on your finances. Depending on your circumstances, you may be able to get unemployment for being fired. You can receive a payment within a few days if you are eligible for unemployment benefits.
Take Out a Loan
When you owe money to a lender or repossession company, the quickest way to obtain a lump sum is to apply for a loan. There are various loan options available depending on your financial situation.
You can get easy payday loans online despite a low credit score, but keep in mind that the repayment length is usually only two weeks. You could apply for an extended personal loan if you need additional time to pay off a loan. Ensure you compare lenders and interest rates before officially signing a loan agreement.
Get a Second Job
If you have talked with your lender about reinstating the auto loan or redeeming your car, they will give you a deadline date. If there is sufficient time to get your car back, you can get a second job to obtain enough money for payment arrangements. There are plenty of work opportunities, such as ride-sharing, selling items online, tutoring, delivering online orders, etc.
FAQ: Financial Assistance for Car Repossession
To appeal a decision regarding financial aid for car payments, one typically needs to contact all financial assistance programs directly, providing evidence of their financial hardship and the necessity of the monthly payment relief.
Depending on the terms of the assistance programs, it might be possible to receive financial assistance for auto payments more than once, especially if one faces recurring financial hardships.
The amount of financial assistance for vehicle repossession varies based on the assistance programs. Some might cover a few monthly installments, while others could offer more extensive support.
To qualify for financial assistance for car repossession, one typically needs to demonstrate financial hardship, have a history of consistent car payments, and be enrolled in an automobile loan that recognizes such hardship programs.
To apply for financial assistance to avoid car repossession, one should contact their car loan provider, inquire about available financial aid programs, and submit the required documentation showcasing their financial situation.
Financial institutions, credit unions, and some specialized financial aid programs offer financial assistance for car repossession to help borrowers maintain their monthly payment schedule.
Eligibility for financial assistance to avoid car repossession typically depends on the borrower’s finances, their history with car payments, and the terms of their auto loans.
The auto loan provider or the institution offering the financial aid programs usually decides on an individual’s eligibility based on their financial records and car payment history.
The maximum amount of money one can receive from assistance programs varies. It’s typically based on the outstanding balance of the auto payments and the terms of the car loan.
Repayment terms and interest rates for financial aid vary based on the assistance programs. Some might offer interest-free periods, while others might adjust the monthly repayment schedule to ease the financial burden.
Required documents often include proof of income, evidence of financial hardship, and details of the auto loan and car payment history.
The turnaround time for financial aid can vary, but once all required documents are submitted, many financial aid programs aim to provide a decision within a few weeks.
A Word From CreditNinja About Financial Assistance for Car Repossession
If a lender has repossessed your vehicle, don’t panic! You have time to develop a financial strategy. CreditNinja knows losing access to reliable transportation is frustrating, but you may want to avoid making any decisions impulsively. Consider your finances and determine which financial solution would benefit you long term.
While many people use loans to obtain a large lump sum for repossession fees quickly, avoid settling for the first loan offer. CreditNinja suggests you take inquiries with different lenders and compare loan terms. By working with the first lender offering you money, you may struggle financially later due to high-interest rates and short repayment terms. Ensure you ask plenty of questions and make timely payments after obtaining a loan to avoid further decreasing your credit score.
1. Loan Defaults and Repossessions Returned to Historical Norms in 2022 | Cox Automotive Inc.
2. 47 Car Loan and Repossession Statistics for 2023 | Find The Best Car Price
3. Can I Get My Repossessed Car Back? | NOLO
4. How Does Repossession Work? | Experian