How To Get Your Car Out Of Repo
What if it’s too late and your car has already been repoed? Many states have laws on the books about how long and under what conditions lenders must allow you the opportunity to get your vehicle back, but the terms aren’t exactly favorable, especially if you’re in the kind of financial situation that led to repo in the first place.
Generally, the law only compels lenders to release your car if you pay off the loan plus any towing and storage charges that have accrued. In practice, however, most lenders are willing to give your car back if you can at least catch up with your late payments .
One option if you’re struggling to pay your car payment is to try and sell your car for cash to pay off the loan, but that won’t work if you owe more than the car is worth.
If you leave your vehicle in repo, either because you can’t afford to get it out or you just decide it’s not worth it, you’re still not completely off the hook. The bank will likely auction off your car to the highest bidder, then apply the revenue from that sale to your remaining balance, including repossession charges. If that doesn’t cover your entire debt, the bank can come after you for the remainder, including handing your account over to a collection agency and reporting the delinquency to the credit bureaus.
Is There A Grace Period For Car Payments
Most lenders give their borrowers a period of 10 days during which payments are still considered on time. After those 10 days and up to 30 days, a payment is considered late, and you may be charged a late fee. After 30 days, your payment is considered a missed payment, and your loan may be in default. Its important to read your loan documents to see what, if any, grace period your auto loan has.
Know What You Owe And How Much You Can Pay
If you simply overlooked the payment but can cover it, great. Skip ahead to Step 2. But if youre having a hard time pulling together your payment, start with a little research.
Know your loan details: Make sure you understand your loan balance, interest rate and term . Check to see if theres a fee for a late or missed payment.
Know what you can pay: Review your budget to see if you can trim any expenses so you can put more toward your loan payment. Try to pull together some extra cash.
Once youve identified how much you can pay this month, take an honest look at your overall situation. Think about whether this is one tight month or if your car payment is an ongoing problem. In general, try to keep car expenses including loan payments, insurance, gas and maintenance at no more than about 20% of your take-home pay.
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Avoiding An Auto Repossession
As soon as you realize youre going to miss your next payment, reach out to your lender and let them know about your situation. You can sometimes avoid repossession and missed payments by talking to your lender ahead of time, but if you miss just one payment, know that you run the risk of losing your car.
Your lender is more likely to work with you if you ask for help before its too late, since they dont want to go through the repossession process either. Depending on your current situation, past payment history, and what your lender allows, there are some options out there that might help you avoid repossession.
Some lenders are willing to let you skip a months payment and tack it onto the end of the loan. Another common option lenders may offer is to allow you to skip a payment, but add it to your payment the following month.
The fact is, you arent going to know what your options are until you ask, so get in contact with your lender as soon as possible.
Talking With Your Lender
If youre having trouble making car payments, contact your lender as soon as possible. Many lenders will work with customers they believe will be able to pay soon, even if the payments are slightly late. You might be able to negotiate a delay in your payment or a revised schedule of payments. If you can reach an agreement to change your original contract, get it in writing to avoid questions later.
If you cant reach an agreement, your lender may demand that you return the car. If you agree to a voluntary repossession, you might pay less in fees. But even if you return the car voluntarily, youre still responsible for paying any deficiency on your contract, and your creditor still may put the late payments or repossession on your credit report.
For more on how to deal with debt, go to ftc.gov/debt.
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Reducing Your Repossession Risk
The time to reduce your repossession risk actually starts long before you fall behind on payments. During the car-shopping process, youre in the position to negotiate with lenders and dealerships to ensure that you wont fall behind on your car loan later.
Here are some tips to help you prevent repossession from the start:
- Make a budget. Start by being realistic about what you can afford. Make a budget and look at the car loan payments that give you a little wiggle room. Picture the worst-case scenario and think of how long you could manage your payment if you lost your job or suffered another financial emergency.
- Choose a car and lender carefully. Once youve determined the monthly payment you can reasonably afford, its time to meet with a lender to discuss what car you can buy. A competitive interest rate allows you to purchase a more expensive car since that monthly payment will go more toward the principal than interest.
- Negotiate with the lender. Dont be shy about speaking up if a payment turns out to be more than you planned. Remember that at the start of your relationship with a lender, youre in the position to negotiate. If you see that the lender or dealership has tacked on fees that have bumped up your monthly payment far more than youd originally planned, dont sign the paperwork or take the vehicle.
Youll Be Hit With Late Fees And Extra Interest
You will typically be charged a late fee on your car payment, though this may be waived if you have never missed a payment before. In addition, interest will continue to build on the unpaid principal of your loan, which may increase the total cost of your loan in the long run.
If you do make a timely payment, your lender may be willing to waive these fees, as long as you do not keep missing payments.
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What Rules Does My Lender Have To Follow
Once the period to catch up on your payments has passed, the lender can repossess your vehicle, but they have to follow these guidelines:
- The repossession agent cant use force or threats when repossessing the vehicle.
- The person sent to get the vehicle is not allowed to go onto your owned or rented property unless you allow it. But, if your car is parked on the street next to your property, the person doesnt need to have your consent.
- Repossession from other public or private locations is usually allowed as long as the repossession agent does not breach the peace or engage in disorderly behavior.
- The person sent to get your vehicle has to tell the police department in your city or town about the repossession within one hour of taking your car.
What Are Auto Loan Deferment Programs And How Do They Work
Under normal circumstances, most lenders will report a late payment to the credit bureaus once it’s at least 30 days overdue, and they’ll typically come to take your vehicle away after you’ve missed three or more payments in a row.
A deferment or forbearance allows you to skip between one and three payments with no late fees or penalties. After the deferment period ends, either your monthly payment will either go up slightly or your loan will be extended by about the same amount of time as the deferment.
On the downside, interest will continue to accrue during the months you skip your payment, so you’ll end up paying more for your vehicle in the long run. But on the plus side, your missed payments will not show up as negative marks on your credit report, so your credit score shouldn’t take a hit.
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If Repossession Is Inevitable
Repossession can be a sudden and wrenching experience that can leave you stranded without transportation. If you find yourself nearing repossession, consider these options to avoid this situation:
Voluntarily surrender your car. This will still hurt your credit score, but it will save you the cost of the repossession fees. The lender will give you instructions about how the car will be picked up.
Remove all your personal items from your vehicle. This is easier than retrieving them later from an impound lot.
Restore the car to its original state. You will be charged for any equipment that is not original. Plus, youll want to hang onto anything that has value, like a sound system you added.
Look for a letter of intent from the lender. This will tell you where and when the car will be sold. If your finances improve shortly after the repossession, you could go to the auction and buy your old car back. It happens all the time, Huang says.
About the author:Philip Reed is an automotive expert who writes a syndicated column forNerdWallet that has been carried by USA Today, Yahoo Finance and others. He is the author of 10 books.Read more
What To Do If Your Car Is In Danger Of Being Repossessed
Because the repossession process is outlined in your loan agreement, your lender legally can repossess your car without notice or a court order. But most lenders will call, email or send notices outlining the consequences if you begin missing car payments.
If youve missed even one payment, heres why now is the time to dig up the loan agreement you signed when you originally bought or leased the car:
Your loan agreement should state how many payments you can miss before the lender can repossess your car.
If you havent been paying your auto loan, theres a good chance you havent been paying your auto insurance either, and some lenders require insurance as a condition of your loan. Even if you havent missed enough payments to have your car repossessed, the lender could potentially take your vehicle due to inadequate auto insurance.
Find your contract and contact your lenders loss mitigation or collections department to explain your situation, advised Jenelle Davis, who worked in the credit union industry for seven years.
Act very quickly, she said. Because at that point, the loan has not been sent out to collections.
The repo company cannot breach the peace aka break the law. If the collector uses physical force or destroys your property, you can potentially file a lawsuit. Keep notes of all interactions.
Theres no shame in saying I have a couple hundred bucks in my budget, can I throw this on the loan so that I dont get it repoed? she said.
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What To Do If You Cant Make Your Loan Payments
The first rule of preventing a vehicle repossession: Communicate early and often.
Although lenders may have the legal right to start the repossession process the day after a missed payment, most give customers a grace period of at least 10 days when they wont even charge a late fee. If youre in this situation, the time to act is now.
If you have the cash, paying off what you owe to make your loan current again may be the ideal solution, but there are other options if youre struggling to make payments:
Its to your lenders financial benefit to work with you rather than spending the money to repossess your car, but they cant help unless they know what youre facing and what youre able to pay, McClary said.
Communication is one of the best tools that you have in the earliest stages when youre late making car payments, he said. The fewer unanswered questions that your lender has, the more likely they are to try to cooperate.
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Repossession By Electronic Disabling Device
When you received auto financing, you may have agreed to the installation of an electronic disabling device in your vehicle. More and more creditors are using this technique to ensure that theyre able to regain possession of vehicles that are in default.
If your car has one of these devices installed, it will prevent your car from starting if you do not make your payments on time. Depending on your contract with the lender and the laws of your state, using this device may be considered the same as a legally-valid repossession, or it could be considered a breach of the peace.
Example Credit Contract Did Not Specify Each Item
Hoani buys a few items of household furniture on finance. The finance company does not list all the items individually on the credit contract as required, but only states “dining room table and chairs, lounge suite etc”. The finance company cant rely on the credit contract to repossess all the items if Hoani defaults on his loan as they didnt specify each item individually. If they repossess items not listed in the contract, Hoani can report them to the Commerce Commission, and may be able to get help from Community Law.
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When The Repo Man Lurks Around The Corner
- Skip tracing Repo people are good detectives, using online databases to find people who are trying to evade the banks and lenders. Sometimes, theyll have to take the old-fashion approach of making phone calls and knocking on doors. There are even informants at times. These tactics may seem unethical, but they are legal and perfectly understandable. After all, no one gets a free pass when it comes to paying bills.
- People watching Now this is where things get interesting. When people fear theyre about to have their car repossessed, theyll hide it in a garage, or keep shifting its location so that the repo man gets confused. So the repo people have to keep track of such individuals. In the moment when theres an opportunity to seize the vehicle, the repossession has to happen.
- Remaining calm Remember the expression, dont shoot the messenger? Well, many people literally ignore that phrase when the repo guy comes along some actually shoot at them! If theyre not getting shot at, theyre facing verbal abuse, or physical assault. Repo men are merely messengers since theyre doing a task thats initiated by financial institutions. Despite all of this, they have to remain calm and non-confrontational.
How Much Persistence Goes Into A Car Repossession In Canada
Repo men and women have no problem returning again and again to try and nab your car. Its their job. A car repossession in Canada is not to be taken lightly, and what youve seen in movies or T.V. shows about repo people isnt fiction theyre very, very persistent.
If you stopped making payments, for whatever reason, starting back with them will bring the car repossession process to an end. Of course, its not easy to do so. However, there ways to stop being the target of repo people, even if youre struggling to make payments.
But lets first talk more about these silent stalkers
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How To Handle Vehicle Repossession
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If you think your car could be repossessed, you might feel that youve reached the end of the road. But there may still be ways to avoid repossession or, barring that, lessen its damage.
Heres how repossession works: If you have missed several payments on your vehicle, the lender can repossess your car and sell it at an auction. You will then have to pay the difference between what the car sells for and what you still owe, plus various fees.
While state laws vary, you may have time to make the missing payments and retrieve your car before it is sold at auction. Or, you can attend the auction and buy it back yourself.