How Does Auto Repossession Work?

Posted by Ryan on August 5th, 2019

The need to have a personal car to easily navigate through town, go for shopping, visit friends and families cannot be overemphasized. However, there are certain unpleasant occurrences that could lead to auto loan repossession, a few of them may be as a result of missed payments, increase in debt, or difficulty in paying for repairs among others.

If you find yourself in this kind of unpleasant situation, then it becomes important for you to know how the whole repossession thing works so that you don’t complicate issues any further. Your understanding of repossession will help you to negotiate the way forward.

What is Car Repossession

Repossession is when your lender or creditor takes possession of your car without warning when you fail to abide by the terms of the loan contract or when you default on payment. The contract you sign with the lender gives your lender the right to your car until you have fully paid off the loan. The main purpose of repossessing your car is to allow your lender recoup the money you still owe on the car and they can sell it off or sell the contract to another person who will repossess the car.

The money from the sale is used to cover for the money you still owe on the car. Hence, repossession is an exit strategy for the lender or creditor should the borrower defaults or fails to pay back the loan.

Car repossession can happen due to the following;

• Missed and late payments: Failure to pay on the agreed date or missed payment date may result in your lender repossessing the car.
• Voluntary Repossession: This rarely happens as most repossessions are initiated by the lender and not the borrower. But in cases where the borrower feels compel to voluntarily call for the repossession of the car, then the lender has no choice.
• Inadequate Insurance: In some states, not having the right insurance or insurance expiration on the car can be considered as a default and this may cause the lender to repossess the car.
• Car Repairs: If you have enough money to pay for the car repair and it is parked in the mechanic lot, this may cause your mechanic to call your lender to avoid a mechanic’s lien on the title and your lender might have to repossess the car. If you wish to get the car back, you need to pay for the cost of repairs and the money used in towing the car.
• The car is towed: If your car is towed or impounded, it is your responsibility to get the car out and if you can do this and also pay your loan in the process, it becomes imperative to come in at this stage. If your car steps in to get the car out, then you have to pay for all the expenses if you want the car back in order to avoid repossession of the car by your lender. 

Once your car is repossessed, your bad credit auto lender can sell the car and if the amount the car is sold is higher than the amount you owe, your lender refunds you the change. However, if the money the car is sold for is not enough to cover the amount you owe, your lender might have to request for a refund of the deficiency balance from you.   

Learn more about repossession from https://www.thebalance.com/what-it-means-to-have-a-repossession-on-your-credit-960751.