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Are you able to pay off a car loan to avoid repossession? Advertiser Disclosure Advertiser Disclosure We are an independent, advertising-supported comparison service. Our mission is to help you make smarter financial decisions by providing you with interactive financial calculators and tools as well as publishing original and objective content. This allows you to conduct research and compare information at no cost to help you make financial decisions with confidence. 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 Profit The products that are featured on this site are from companies that compensate us. This compensation may impact how and where products appear on this website, for example such things as the order in which they may appear within the listing categories in the event that they are not permitted by law for our mortgage or home equity products, as well as other products for home loans. But this compensation does have no impact on the information we publish, or the reviews you read on this site. We do not include the vast array of companies or financial deals that could be open to you. Srinrat Wuttichaikitcharoen/EyeEm/Getty Images

5 minutes read. Published November 28, 2022

The article was written by Sarah Sharkey Written by Contributing Writer Sarah Sharkey is a contributing writer for Bankrate. Sarah writes about a range of subjects, including savings, banking, homebuying, homeownership and personal finances. Written by Rhys Subitch Edited by Auto loans Editor Rhys has been editing and writing for Bankrate from late 2021. They are passionate about helping readers gain confidence to control their finances by providing concise, well-researched and precise information that breaks down complicated topics into bite-sized pieces. The Bankrate promises

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We make sure that everything we publish will ensure that our content is reliable, honest and reliable. We have loans reporters and editors focus on the points consumers care about the most — the various types of loans available and the most competitive rates, the top lenders, ways to repay debt, and many more. So you’ll be able to feel secure when making a decision about your investment. Editorial integrity

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There are money-related questions. Bankrate can help. Our experts have helped you understand your money for over four decades. We continually strive to provide consumers with the expert guidance and the tools necessary to succeed throughout life’s financial journey. Bankrate adheres to a strict code of conduct , so you can trust that our information is trustworthy and reliable. Our award-winning editors and journalists create honest and accurate content that will help you make the right financial decisions. The content we create by our editorial staff is factual, accurate, and not influenced through our sponsors. We’re transparent about the ways we’re capable of bringing high-quality content, competitive rates, and helpful tools for our customers by describing how we make money. Bankrate.com is an independent, advertising-supported publisher and comparison service. We receive compensation for placement of sponsored products or services, or through you clicking specific links that are posted on our site. So, this compensation can affect the way, location and in what order products appear within listing categories and categories, unless it is prohibited by law for our mortgage, home equity and other home lending products. Other elements, like our own proprietary website rules and whether a product is available in the area you reside in or is within your own personal credit score could also affect how and where products appear on this site. Although we try to offer an array of offers, Bankrate does not include specific information on each credit or financial product or service. Car repossession has increased rapidly in the last few years, as per reports . If you fall behind on your obligations and your car is at risk of repossession The good news is that you can take steps to stop this unfortunate conclusion. In between reinstatement as well as loan modification There are a variety of options to avoid repossession. Does paying off a car loan end the process of repossession? The rules for repossession differ depending on the state that you reside in. In the majority of states, the lender can repossess the vehicle at any time you’re in default. Depending on the terms of your loan agreement, that could mean you have missed one or two payments. There are a variety of steps to take between the time you miss a payment and the eventual repossession of your car. Based on the situation you’re in you should take the appropriate steps . If you haven’t received any notice that you can’t make your car payment, you’ll be aware about this financial fact before your lender will. Do not wait around for the lender to know that you don’t pay, be proactive and call the lender to explain the situation. The lender might be willing take your concerns into consideration in order to avoid the costs of repossession. Make an effort to find an agreeable solution. For example, you can provide more details about your situation, including when you’ll be able to make the next payment , or the amount you’re able to pay now. Depending on the history you have with the lender and your credit score, you may be able to work out some sort of temporary reprieve, or . This is particularly true if this is the first time you’ve had to make a missed payment. If the lender has only sent notice, a lender can legally repossess your car without or with notice in a variety of states. But your lender will likely send you a notice about its intentions to repossess the vehicle before it happens. If you are given an official notice of repossession, the first phone call you need to contact your lender. Again, an open dialogue between you and the lender may result in a solution that avoids repossession. In the meantime, waiting until you get an email means you’ll be caught up in explaining the situation in front of your lender. If your lender is willing to hear you out, give as much information as you can about when you can make a payment. Also volunteer how much you can put toward a loan in the present. It is beneficial for the lender to negotiate a temporary arrangement. The business is looking to be paid, and you’ll probably need your vehicle to go to work. Dependent on the lender and your past it is within the realm of possibility. In the event that your lender has already begun the process. If it is the case that the lender has already begun the process of repossession, you may not be able to access your vehicle. In this instance, the reinstatement or restitution of the loan (also referred to as resolving the defaultmay be the best possible outcome. In certain states, you’ll need to make payments for the entire due amount. This includes all missed payments plus any late fees which have accrued. Usually, the lender will also ask you to cover repossession fees prior to releasing the car to you. In other states, you may be required to repay the entire loan to obtain your car back. This process is known as redemption. Not every state allows for reinstatement. If your state doesn’t have laws governing reinstatement and it isn’t built into the contract, it’s best to nonetheless contact your lender. They may be willing to amend your loan in order to incorporate it. How auto repossession works repossession is a stressful experience. Understanding the process can aid you in navigating it, and possibly find an answer. 1. When a borrower is late on payments, the lender can repossess the car in the event that you become in default and also to send it to a debt collection agency. The exact number of missed payments required to be in default on your loan will depend on the state you live in and the terms of your loan contract. In some cases, you will only need only miss one installment to be in default. In other instances you may need to make three or more payments in order for an issue to occur. In this situation, clear dialogue with your lender is crucial. If you are able to work out a reprieve, now is the time to ask. 2. Lender repossess your car once you’re in default, your lender may or may not give you notice of its intent to repossess the vehicle. Contact your lender to request an arrangement for a short-term payment to avoid repossession if you receive an official notice. Depending on your state, the lender may be able to take possession of your vehicle at any time — regardless of whether or not you’ve received a notice. 3. Lender sells the vehicle Once the lender is in possession of the vehicle It could keep the car until you are caught up with your loan. However, the most likely outcome is that the lender will sell the vehicle. In certain states, the lender will notify you of the sale and offer you the chance to re-establish your loan. If you wish to purchase the vehicle back prior to the sale, you’ll have to pay the entire amount due and any fees associated with repossession. However, many repossessions are sold through auction. You are entitled to attend the auction and put in an offer for your car. 4. Lender pays you for any outstanding balance. After you sell the car, the lender will use the proceeds to pay what you have to pay. However, the price you pay for the car may not be enough to pay your entire debt. If you owe more than your lender receives for selling the vehicle, it’s a deficit. And unfortunately, in most states the lender could be able to sue you for any defects. For example, let’s say you owe $10,000 however, your lender only sells it for $7,000. In that scenario the amount owed is $3000, and the lender may have the right to pursue you for the difference. If there’s a surplus from the sale then the lender may be required to transfer the money to you. This is rare, but if it does happen, you will at least have a small gain from the sale. Another method to avoid repossession is to use the following strategies. Refusing repossession is a important concern for the majority of borrowers. After all, your vehicle is likely to be a major component of your ability to earn an income. Some ways to avoid repossession include: Reinstate the loan If you are able to be current with your past due payments and the lender will reinstate your loan. This means that you’re bringing your situation back to where it was. When you are reinstated, you’ll need to continue making your regular car payment. Take care to pay off the loan Then that paying off the entire auto loan is easier said than done. If this is within reach this is a way to exit this situation. Refinancing is difficult given your credit score is taking an injury from missed payments. However, if you are able to find an alternative loan with the lowest interest rate, or regular payments, it might be the right choice for your financial situation. Declare bankruptcy. If you are behind on other bills, bankruptcy may be an alternative. Although there are ways to however, it’s not a sure thing. Repossession may still happen when you don’t discover a solution that works. The drawback to these possibilities is that you’ll likely have to raise the funds to settle the issue. In the end, if you’re facing the possibility of repossession, which is uncomfortable discuss the situation with your lender promptly. Through open communication and open lines of communication, the lender might be able to offer a solution that works for everyone.

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Written by Contributing Writer Sarah Sharkey is a contributing writer for Bankrate. Sarah writes about a wide range of topics, such as savings, banking, homebuying, homeownership and personal financial matters. Edited by Rhys Subitch Edited by Auto loans editor Rhys has been writing and editing for Bankrate from late 2021. They are committed to helping readers gain confidence to manage their finances with concise, well-studied and well-researched content that breaks down complicated topics into digestible chunks.

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