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Are you able to pay off your 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 tools and financial calculators that provide objective and original content. We also allow you to conduct research and compare information for free to help you make sound 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 Make Money The products that are featured on this site are from companies that pay us. This compensation can affect the way and where products appear on this website, for example such things as the order in which they appear within the listing categories in the event that they are not permitted by law. This applies to our mortgage home equity, mortgage and other products for home loans. But this compensation does not influence the content we publish or the reviews appear on this website. 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 range of subjects, such as savings, banking, homebuying, homeownership and personal financial matters. Edited by Rhys Subitch and edited by Auto loans editor Rhys has been writing and editing for Bankrate since the end of 2021. They are passionate about helping readers gain the confidence to manage their finances with detailed, well-studied information that breaks down complex topics into manageable bites. The Bankrate promises

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There are money-related questions. Bankrate has the answers. Our experts have been helping you manage your finances for more than four years. We strive to continuously give our customers the right advice and tools needed to be successful throughout their financial journey. Bankrate adheres to a strict code of conduct standard of conduct, so you can rest assured that our content is truthful and reliable. Our award-winning editors and journalists create honest and accurate content that will help you make the best financial choices. Our content produced by our editorial team is objective, factual, and not influenced from our advertising. We’re open about the ways we’re in a position to provide quality content, competitive rates and helpful tools to you , by describing how we earn our money. Bankrate.com is an independent, advertising-supported publisher and comparison service. We are compensated in exchange for placement of sponsored products or services, or when you click on specific links on our website. This compensation could influence the manner, place and when products are listed in the event that they are not permitted by law. We also offer mortgage, home equity and other home lending products. Other elements, like our own proprietary website rules and whether or not a product is available within your area or at your self-selected credit score range could also affect the way and place products are listed on this website. Although we try to offer an array of offers, Bankrate does not include specific information on each credit or financial products or services. Car repossession has increased rapidly in the last few years, as per reports . If you are in arrears with your obligations and your car could be in danger of repossession There’s good news that you can take action to prevent this dreadful outcome. From reinstatement to loan modification, there are multiple opportunities to prevent repossession. Can paying off a car loan end the process of repossession? The rules for repossession differ based on the state in which you reside. In many states where repossession is allowed, the lender may take possession of the vehicle at any time you’re in default. Based 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 vehicle. Based on the current circumstances you should take the appropriate steps . If you’ve not received any notice that you are unable to make your car payment, you’ll likely know about this financial fact before your lender does. Do not wait around for the lender to know that you miss a payment make sure you call the lender to explain the situation. The lender might be willing to take your concerns into consideration in order to avoid the costs of repossession. Make an effort to find a reasonable solution together. For instance, you could give more details regarding your situation, when you can make the next installment or what you’re able to pay now. Based on your past relationship with the lender, you might be able to work out a temporary reprieve or . This is especially the case in the case of this being the first time that you’ve ever missed a payment. If the lender has sent only notice, a lender may legally take possession of your car without or with notice in a variety of states. But your lender will likely send you a notification of its plans to take possession of the vehicle prior to when it happens. If you get notice of repossession the first call you should be making is with your lender. Also, a dialogue between you and the lender could lead to an option that prevents repossession. In the meantime, waiting until you get an email means you’ll be playing catch-up in explaining the issue in front of your lender. If your lender is willing to listen to your concerns, provide as much information as you can regarding the time you’ll be able to pay. Also volunteer how much you can put to make a payment in the present. In the end, it’s in the lender’s best interest to come up with a temporary arrangement. The business needs to be paid and you’ll likely require your car to get to work. Depending upon the lender and your personal history, a temporary agreement is within the possible. In the event that your lender has already begun the process If you are the lender has already begun the process of repossession and you do not be able to access your vehicle. At this point, reinstatement or restitution of the loan — also referred to as curing the default- could be the best alternative. In certain states, you’ll have to pay the entire past-due amount. This includes all missed payments along with any late fees that accrued. In most cases the lender will also require you to cover repossession fees prior to releasing the vehicle to you. In other states, you could be required to repay the entire loan to get your car back. This procedure is known as redemption. Not every state allows for reinstatement. If your state does not have reinstatement laws and it’s not included in your contract, you must still reach out to your lender. They may be willing to amend your loan to include it. How auto repossession works repossession is an unpleasant experience. Understanding the process can assist you to work through it, and possibly find solutions. 1. Borrower misses payments Your lender can repossess the car as soon as you are in default — and then be able to transfer the vehicle to a debt collection agency. The exact number of missed payments needed to default on your loan depends on your state and the terms of your loan contract. In certain situations it is only necessary to miss one payment for you to be in default. In other cases you may need to make three or more payments for an issue to arise. In this situation, clear communication to your lender is vitally important. If you are able to work out an extension, now is the right time to inquire. 2. Lender will take your vehicle once in default Your lender may or not send you a notice of its intention to repossess the vehicle. Call your lender to request an arrangement for a short-term payment to avoid repossession in the event that you receive a notice. In the event of a state-wide restraining order and the state of your car, the lender may be able to take possession of your vehicle at any time — regardless of whether you’ve received notice. 3. Lender sells the vehicle once the lender is in possession of your vehicle It could keep the car until you are caught up with your loan. The most likely scenario would be the lender will decide to sell the vehicle. In several states the lender must notify you of the sale and offer you the chance to re-establish your loan. If you decide to purchase the vehicle back prior to the sale, you’ll have to pay the full amount owed and any repossession expenses. Many repossessions are sold at auction. You have a right to attend and make a bid on your vehicle. 4. Lender sends your bill for any outstanding balance. After you sell the car, the lender will use the proceeds to pay the debt you are owed. However, the price you pay for the car might not be enough to cover your entire debt. If you have more debt than your lender receives for selling the car, that’s an indeficiency. Unfortunately, in many states the lender can be able to sue you for any defects. Let’s say for instance that you owe $10,000, however, your lender is able to sell it at $7,000. In this scenario the amount owed is $3000, and the lender may be entitled to sue you for the difference. However, if there is a surplus from the sale and the lender could be required to distribute it to you. This is rare, but if it does occur, you’ll probably get a little benefit of the transaction. Another method to avoid repossession is to use the following strategies. Refusing repossession is a top priority for most consumers. In the end, your car is likely a key piece of your ability to earn an income. A few ways to prevent repossession include Reestablishing the loan If you are able to get current on your past-due payments, the lender will reinstate your loan. Essentially, that means you are bringing the situation back to where it was. After reinstatement, you’ll have to continue making your regular car payment. Pay off the loan: Of course that paying off the entire auto loan is much easier said than done. However, if this is possible, it is one solution to avoid this. Refinancing is difficult given your credit score takes the hit when you miss payments. If you can locate an alternative loan with the lowest interest rate, or the monthly installment, it could be the right move to manage your finances. Declare bankruptcy. If you’re behind in other charges The bankruptcy process could be an alternative. Although there are methods to avoid bankruptcy however, it’s not a sure thing. Possession could still occur when you don’t find a workable solution. The drawback to this option is that you’ll require an amount of money to resolve the situation. The main point is that if you’re facing the uneasy prospect of repossession discuss the situation with your lender as soon as possible. With open lines of communication and open lines of communication, the lender may offer a deal that is beneficial to everyone.

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Written by Contributing Writer Sarah Sharkey is a contributing writer for Bankrate. Sarah writes on a variety of topics, such as savings, banking homeownership, homebuying, and personal financial matters. Edited by Rhys Subitch Edited by Auto loans editor Rhys has been editing and writing for Bankrate since the end of 2021. They are passionate about helping readers gain the confidence to manage their finances with precise, well-studied information that breaks down complicated topics into manageable bites.

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