A car loan cancellation is an immediate end to the financing agreement you have with your auto lender. The cancellation can be initiated by either the lender or by you, the borrower, for a few specific reasons that are always detailed within the loan terms. A car loan cancellation is usually avoidable, but if you find yourself dealing with one, there are ways to navigate the situation into a positive (or at least less disastrous) result.
Understand Loan Terms
The wording of your car loan is detailed and specific. Your first line of defense against car loan cancellation is an understanding of the terms of the car financing agreement. This understanding will also help you handle a cancellation if it has already begun or you are initiating it on your end. The circumstances that need to be present in order to justify a cancellation will be clearly laid out within the loan terms, as will the potential consequences and outcome of the loan being cancelled. Read the loan before you sign it, ask questions about things you do not fully understand, and keep a full copy of the financing agreement in your records.
Lender Cancellation Causes
There will likely be a litany of ornate legal language used to describe why your lender has cancelled your car loan, but the root cause usually boils down to nonpayment or habitual late payments. As soon as you miss a scheduled payment, your car loan can be declared in default and cancelled. You will probably have an early indication of a potentially missed loan payment. As soon as you know you can't make a car loan payment, contact the financing company to negotiate around an immediate cancellation. A conversation with the lender is especially important if you have missed payments or paid late previously.
Settlement Negotiation
Should you be unsuccessful in avoiding a car loan cancellation, you should try to negotiate a settlement with the lender that is within your financial grasp. The best case scenario involves settling the cancelled car loan for less than the car is worth in fair market value. You can sell the car and use the funds from the sale to settle the loan. The inconvenience of needing to find new transportation is better than the alternative, which is allowing the car to be repossessed by the lender.
A clear understanding of the terms of your car loan and what causes a cancellation of that loan can help you either avoid a cancellation or negotiate effectively once one begins.
* Image courtesy of FreeDigitalPhotos.net
