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Are you able to pay off your car loan in order to avoid repossession? Advertiser Disclosure Advertiser Disclosure We are an independent, advertising-supported comparison service. Our aim is to assist you make smarter financial decisions by providing you with interactive financial calculators and tools that provide objective and original content, by enabling users to conduct research and compare information for free and help you make informed financial decisions. Bankrate has partnerships with issuers such as, but not limited to American Express, Bank of America, Capital One, Chase, Citi and Discover. How We Earn Money The products that are featured on this site come from companies that compensate us. This compensation can affect the way and when products appear on this site, including such things as the order in which they be displayed within the categories listed in the event that they are not permitted by law for our mortgage, home equity and other home lending products. However, this compensation will not influence the information we provide, or the reviews that you read on this site. We do not include the entire universe of businesses or financial deals that could be available to you. Srinrat Wuttichaikitcharoen/EyeEm/Getty Images

5 min read Published November 28th, 2022.

Sarah Sharkey Written Sarah Sharkey Written by Contributing Writer Sarah Sharkey is a contributing writer for Bankrate. Sarah writes about a wide range of topics, including savings, banking homeownership, homebuying, and personal financial matters. Edited by Rhys Subitch Editored By Auto loans Editor Rhys has been editing and writing for Bankrate since late 2021. They are passionate about helping readers gain confidence to manage their finances by providing detailed, well-studied information that breaks down otherwise complex topics into manageable bites. The Bankrate promises

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Therefore, this compensation may impact how, where and when products appear within listing categories, except where prohibited by law. This is the case for our mortgage or home equity products, as well as other home lending products. Other factors, like our own website rules and whether or not a product is available within your region or within your own personal credit score could also affect how and where products appear on this website. While we strive to provide a wide range offers, Bankrate does not include specific information on every financial or credit product or service. Repossessions of cars have increased dramatically in the last few years, as per reports . If you are in arrears with the payments you have made and your car is in danger of being taken away There’s good news that you can take action to avoid this unfortunate outcome. From reinstatement to loan modification, there are multiple opportunities to avoid repossession. Can paying off a car loan end the process of repossession? Repossession rules differ depending on the state that you reside in. In many states there is a possibility that the lender can repossess the vehicle at any time you’re in default. Depending on the terms of your loan agreement, this could mean you have missed only one payment. There are several steps from missing a payment up to the ultimate repossession of your car. Based on your current situation, you can take the appropriate actions . If you haven’t received any notification that you are unable to make your car payment, you’ll likely know about that financial reality well before your lender does. Instead of waiting for the lender to find out when you don’t pay make sure you call the lender to discuss your situation. The lender might be willing to hear you out to save the cost of repossession. Try to come to an acceptable solution. For example, you can give more details regarding your circumstances, such as when you can make the next payment , or the amount you can pay right now. Based on your past relationship with the lender it is possible that you will be able to negotiate a temporary reprieve or . This is particularly true if this is the first time you have ever missed a payment. When the lender has only sent notice A lender may legally take possession of your car without or with notice in many states. However, your lender will likely mail you a notice of its plans to repossess the vehicle before it actually happens. If you are given a notice of repossession, the first call you should contact your lender. Again, an open dialogue between you and your lender can lead to the resolution that stops repossession. If you wait until you receive notice of repossession means that you’ll have to catch up when you explain the situation with your lender. If your lender is willing to listen to you out, give as many details as possible regarding when you’ll be able to pay. You should also indicate how much you are able to pay towards a payment now. It is in the lender’s best interest to work out a temporary arrangement. After all, the business needs to be paid and you’ll probably need your car to get to work. Based upon the lender and your personal history it is within the possibility. When the lender has begun the process If the lender has already begun the repossession process and you do not be able access your vehicle. In this instance, the reinstatement to your loan (also referred to as curing the defaultmay be the best option. In some states, you’ll have to pay the full past due amount. That includes every missed payment plus any late fees that have accrued. Usually you will find that the lender will also require you to cover repossession fees prior to releasing the vehicle to you. In other states, you might have to pay off the entire loan to get your car back. This process is known as redemption. Not every state allows for reinstatement. If your state doesn’t have reinstatement laws and it isn’t built into your contract, you should still reach out to your lender. It might be willing to modify your loan so that it includes it. How auto repossession works Auto repossession is an unpleasant experience. But understanding the process can help you work through it, and possibly discover an answer. 1. Borrower misses payments Your lender can repossess the vehicle when you’re in default and then to a debt collection agency. The number of missed payments that are required to be in default on your loan is determined by your state as well as your loan contract. In certain situations, you will only need to miss one payment to become in default. In other cases, you might need to make three or more payments to cause an issue. At this stage, open communication between you and your lender is vitally important. If it’s possible to negotiate an extension, now is the perfect time to make an inquiry. 2. Lender will take your vehicle once you’re in default Your lender may or not send you a notice of its intention to take possession of the vehicle. Call your lender to ask for an interim payment plan to avoid repossession in the event that you receive an official notice. In the event of a state-wide restraining order and the state of your car, the lender could be able to take possession of your vehicle at any time — whether or not you’ve received notice. 3. Lender sells the car once the lender has taken possession of your vehicle the lender may hold the car until you are caught up on the loan. The most likely scenario is that the lender will decide to sell the vehicle. In many states, the lender must inform you about the sale and provide you the chance to re-establish your loan. If you decide to purchase the car back before the sale, you’ll have to pay the full amount owed , including any costs associated with repossession. However, many repossessions are sold through auction. You are entitled to be there and place an offer for your car. 4. Lender sends your bill for any outstanding balance. After you sell the car The lender has to use the funds to pay what you owe. However, the amount you paid for the vehicle may not be enough to cover your entire debt. If you owe more than what your lender receives for selling the vehicle, it’s a deficit. In most states, your lender can be able to sue you for any defects. For example, let’s say that you owe $10,000, however, your lender only sells it for $7,000. In that case the deficit is $3,000 and the lender may be entitled to pursue you for the difference. In the event of surplus to the sale and the lender could be required to distribute it on to you. It’s not common however, if it does happen, you will probably get a little profit by selling the property. Other methods to avoid repossession The prevention of repossession is the top priority for most borrowers. Since your car is likely to be a major component of the way you earn money. Some ways to avoid repossession include reinstating the loan If you are able to get current on your past-due payments then the lender will allow you to reinstate the loan. In essence, you’re bringing the matter back to where it was. After reinstatement, you’ll have to keep making the regular payments to your car. Take care to pay off the loan Naturally, paying off an entire auto loan is a lot easier said than done. If this is within reach this is a option to get out of this. Refinancing is challenging as your credit score is taking a hit from missing payments. However, if you are able to find an alternative loan with an interest rate that is lower or a regular payments, it might be the best option for your finances. Declare bankruptcy. If you’re behind on other debts If you are in debt, bankruptcy could be an option. Although there are options to do so but it’s not an assurance. Repossession may still happen when you don’t come up with a viable solution. The drawback to these possibilities is that you’ll probably need to come up with some amount of cash to settle the issue. In the end, if you find yourself staring down the uncomfortable possibility of repossession contact your lender immediately. With open lines of communication with your lender, the lender could offer a bargain that is suitable for all.


Written by Contributing Writer Sarah Sharkey is a contributing writer for Bankrate. Sarah writes on a variety of subjects, including savings, banking homeownership, homebuying, and personal finances. Editor: Rhys Subitch Edited by Auto loans editor Rhys has been writing and editing for Bankrate since late 2021. They are committed to helping readers gain the confidence to take control of their finances through providing precise, well-studied information that breaks down complicated topics into digestible chunks.

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