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 you can get your car back.
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 will 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?
The repossession process is stressful and can completely derail your life. If you’re ready to get your car back, know there are three ways to get a repossessed car back. The best option will depend on your current financial situation.
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 can 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.
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 on a credit report 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.
When the lender repossessed your car, they reported the incident to the major credit bureaus. A repossession will appear on your credit reports for seven years. Future lenders can see the repossession information through a credit check, which will 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 car payments due to unforeseen financial circumstances, there are options available!
Ask Friends and Family for Help
You can try asking friends and family for financial assistance 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 car 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 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.
The Bottom Line
If a lender has repossessed your vehicle, don’t panic! You have time to develop a financial strategy. While losing access to reliable transportation is frustrating, 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. Make 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.