No matter how you got into a sticky situation, you always have the chance to learn from it and do better in the future. However, that advice doesn’t always help you if you’re going through the situation now. Vehicle repossession is a scary thought. How will you function if you don’t have a car? Sometimes people invest in a car that’s not affordable for their budget, sometimes unexpected life circumstances happen or maybe you just made some really bad decisions—the end result is still the same, the possibility of losing your car because you’ve gotten behind on your payments, and you don’t have a way to come up with the money quickly. If this sounds familiar, you may be asking, what do I do?
Vehicle Repossession 101
According to the Federal Trade Commission (FTC), vehicle repossession is a creditor’s or lender’s right to take back a vehicle if you fail to pay back money you owe on it. What’s more, they have the right to do it without going to court, or without warning you in advance. Although this is the most straightforward answer, it is far from the most accurate. Before you accept your car is gone, always read the fine print to make sure that the creditor/lender was within their rights. You can do that on the FTC’s website. If they are within their rights, and it hasn’t come to seizure yet, there still may something you can do to stop the process.
4 Ways to Avoid Vehicle Repossession
Tip #1: Make up the Late Payments – You may look at the total sum you owe and think there is no possible way to make it happen. If you are serious about keeping your car and remain a vehicle owner, then you also need to be serious about making some sacrifices. Look into ways to make extra cash quickly. Some options may be borrowing from a friend or family member, selling off extra or unnecessary belongings, getting an additional job or finding an additional source of income from a hobby or doing a service for people. Take a good hard look at what your priority is, and then look at your clothes with designer labels, the high-end sports equipment you don’t use or the five gaming stations you have—do you really need those things over your car? Also, turn hobbies into cash on websites like Etsy or Craigslist. If you can find temp jobs, take them, or ask your employer for extra shifts. If you know the repo man is after you and you just need a few weeks, keep your car in the garage, or better yet, call and try to make arrangements. The key is to get motivated. After all, it’s your mode of transportation, and you should decide exactly how important it is.
Tip #2: Sell your Car – If your car is putting you so severely in the hole that you’re risking years of bad credit and losing more than just the car, sell it. You should aim to sell it for a price that covers the missed payments and the balance owed. From there, you have a few choices to make. You can try to find a car that fits better within your budget, or you can hold off and save so you have enough money that you won’t be put in a repossession situation again.
Tip#3: Negotiate and Surrender the Vehicle – If you want to get out from under the car loan with minimal damage to your credit reputation, it is smart to negotiate. Creditors want to spend the least money to resolve a situation, so they may be willing to have a conversation about the best course of action for everyone involved—plus, they may wave fees or reduce the deficiency. The key to this avenue though is to get everything in writing. Safeguard yourself so that they have no room to go back on their word. Surrendering is very different from repossession, and much better for your credit.
Tip #4: Refinance the Car – One last option, although typically for those with decent credit, is to refinance. This will likely extend your repayment terms and lower your payments. Just make sure you understand the consequences if there are anything: for example, a higher interest rate, an upfront payment due, fees or value deprecation of the vehicle.
A Final Option
Bankruptcy is a final option to avoid repossession. Just note that bankruptcy will affect your credit for many years, so use it wisely, and only as a last possible resort.
Repossession can be avoided if you’re willing to put in the work. Before you say you don’t care, think about the negative long-term effects repossession can have on your financial health.
