Avoid Repossession Before Your Car Loan Gets Out of Hand

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Meghan Carbary has been writing professionally for nearly 20 years. A published journalist in three states, Meghan honed her skills as a feature writer and sports editor. She has now expanded her skill-set into the automotive industry as a content writer for Auto Credit Express, where she contributes to several automotive and auto finance blogs.


, - March 2, 2020

It can be hard to admit defeat when it comes to a car loan, but if you can't afford the payments, don't throw in the towel just yet. There are options available for avoiding repossession, and even a few options if you can't.

Talk to Your Lender

Avoiding repossession should be your top priority as soon as you think you might not make a payment. Repossession doesn't happen until you're in default on your loan, which typically happens after 30 days.

However, depending on your situation and the lender you're financing your vehicle with, you could face repossession after your payment is just one day late. Other lenders may not consider you in default until you've missed multiple payments; it all depends on what’s written in your contract.

The first thing you should do if you're worried about your car being repossessed is to contact your lender. Lenders want to avoid repossession just as much as you do. Why? It’s expensive to recover, store, and prepare a vehicle to sell – plus, lenders usually get a below-market price at an auction.

This means it's in the best interest for a lender to help you avoid losing your car to repossession. Not all lenders can help, but you don't know what your lender has to offer until you talk to them.

Common options can include allowing you an extended payment deadline, or allowing you to miss a payment or two. If your lender allows this, these payments are usually added to the end of your loan term.

Consider Refinancing Your Car Loan

If your lender doesn't have options available to help you stay out of default, and you know that making your payments isn't going to get any easier, you may want to consider refinancing your auto loan.

Refinancing a loan means replacing your existing loan with a new one with a lower monthly payment. This is done by either lowering your interest rate or by extending the loan term.

In order to refinance, you need to have a good credit score, or it at least needs to have improved since taking out your original loan. Also, you have to be able to meet the lender's refinancing requirements. These can include an acceptable loan amount, a vehicle that falls within the age and mileage limits, and equity in your car.

When you refinance your existing loan, you must be current on your payment, as well.

Find a More Affordable Car

Avoiding repossession doesn't have to be difficult. Before your loan gets to the point of default, you should keep all options in mind. If your lender isn't able to help you, and qualifying for refinancing is out of the question, it might be time to consider trading in your car for a more affordable vehicle.

A trade-in can be a great option when there's equity in your car. You can use the the money you get from the dealer to pay off your loan. If there's any left over, you can use it as a down payment on a reliable, more affordable vehicle.

If you're upside down on your loan, you can still trade in your car, but you may have to come up with some cash to pay off your loan. This is because the loan amount can't always be covered by the money you get for your vehicle. If you can't come up with the cash, you may be able to roll the negative amount over into the new loan if the lender allows it.

If using your car as a trade-in on a new auto loan with a more affordable payment sounds like the way to go, let CarsDirect help. We work with a large network of special finance dealerships all across the country, and we want to help you find one in your area. To get started, fill out our free and easy car loan request form.

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Meghan Carbary has been writing professionally for nearly 20 years. A published journalist in three states, Meghan honed her skills as a feature writer and sports editor. She has now expanded her skill-set into the automotive industry as a content writer for Auto Credit Express, where she contributes to several automotive and auto finance blogs.


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