Getting your car repossessed
Your car is the one of the most expensive individual items that you own. People routinely spend thousands of dollars on buying or leasing their cars and maintaining, upgrading and even housing their cars. However, when it comes to paying back the money they borrowed to purchase the car, there are far too many people who struggle and cannot manage to scrape together enough money to pay off the note on their car.
It’s one reason car repossession is on the rise in America as the country battles through a recession. Car repossession occurs when a lender or creditor sends a repo man to physically take ownership of your car back. In most cases, the repo man simply finds your car, checks the VIN to make sure the car matches the one in the creditor’s system and then tows it to a lot to be auctioned off to pay back the loan if you can no longer afford it.
Why car repossessions are necessary
Cars get repossessed when people fail to make payments on their car note. Watch this video to get an inside look on how a repo team operates and why they are so necessary to business.
Video: Repo Wars
How you’ll be notified before car repossession takes place
Repossession is not to be taken lightly and, because a creditor must pay for someone to repossess your car, it’s typically viewed as a last resort. Still, you should know that you will likely be notified and have ample opportunities to make payments on your car before it is repossessed. Here are just a few things to look out for:
A late notice: Your car is not going to be repossessed if you happen to be a few days late with a payment. You may rack up late fees, but a large majority of creditors understand that a few days here and there will not ultimately hurt their business. However, if you are missing payments by more than a week, expect a notice. And when you receive this notice, make your payment ASAP to be sure you’ll avoid vehicle repossession.
A phone call: If you fail to respond to a late notice, most creditors will contact you by phone to see what the problem with your payment is. Do not avoid this call. If you have a legitimate reason to give your lender, communicate it and try to work out a payment system. They may not agree to it, but many creditors are willing to listen and work with you to avoid repossession.
A final notice: Once you’ve received this, it’s absolutely imperative that you contact your creditor immediately. Otherwise, you will be subject to repossession. Creditors will typically give you a date to make your payment by. They are not kidding. This is the last step before repossession.
How repossession will affect you and your credit report
If your car is repossessed, you should know that it will affect your credit report and credit score dramatically. First, you’ll be flagged for making a late payment, should you choose to make it following a repossession. However, in addition to your late payment, most creditors also charge you for the actual repossession, which could run as high as $500. If you cannot pay, you will essentially have trouble buying another car for at least seven years, as the blemish will remain on your credit report and make your score dip drastically.
An increase in the number of car repossessions in America
Because of the bad economy, many Americans are facing car repossession. In this video, you’ll find out why repossessions are at a 10-year high in some parts of the country.
Video: A Busy Repo Man
Avoid getting your car repossessed
In order to avoid a repossession altogether, try taking these simple steps:
Make all your car payments on time: If you do this, you will have absolutely no trouble with your creditor. Additionally, you’ll actually build up your credit score and be in the good graces of your creditor.
Stay in touch with your creditor: If you have a rough month, lose your job or simply cannot make a payment, reach out to your creditor and explain your situation. It may not make much of a difference, but a car repossession hurts them as much as it hurts you. It costs them valuable time, money and resources to repossess a car. Call them and see what they can do to help you make your next payment on time.
Make sure you treat your car payment with great care: Aside from a home mortgage, your car is likely one of the most expensive individual items you own. You need to treat it as such. Before you buy a car, make sure you can afford it. Once you buy it, stay current with payments and act responsible.
Is debt settlement an option?
If you’ve tried everything else (creating a budget, talking with your creditor, etc.) and simply cannot afford to pay off your car note, debt settlement may provide one final option. A debt settlement company can take a look at your debt, speak with your creditor and allow you to pay off the remainder of the debt you have on your car note in one reduced payment. Be aware that the total negotiated amount depends on how long you’ve been paying off the car, how consistently you’ve paid off the loan and how the creditor benefits from the negotiation. But for those who simply cannot afford to pay off a car loan every month, this may be the best way to get it done. At any rate, don’t wait until it’s too late and you’re facing repossession. Get behind the wheel and take control of your financial future.