An auto repossession disrupts your life in a number of ways, such as long-lasting credit rating issues and the immediate removal of the transportation you rely upon. While you are still paying off a car loan, lenders are able to repossess your vehicle. You should understand auto repossession and how to avoid it if you financed the purchase of your car.
The Cause of Repossession
When you default on a car loan, your vehicle most likely will be repossessed by your lenders. The terms of the loan you signed will explain in detail all of the possible default conditions, but the most common catalyst for a loan defaulting is a failure to make payments. Until you have paid back all that was borrowed in order to buy your car, the financing company or bank that furnished your loan owns substantial equity in the car. For that reason, the car is not actually your property while any amount of balance remains on the loan. Simply put, if you do not make your car payments, your car will be repossessed. Lenders usually do not need to provide any warning that the repossession is coming, as the billing statements are considered reasonable notice.
Seizure of Your Car
Your lender has the legal right to repossess your car as soon as you default on your car loan. Every state has regulations in place that control how repossessions take place. For example, whomever physically takes your car when it is repossessed cannot disturb the peace, or break the law, while carrying out the repossession. Once someone comes to take your car, it is next to impossible to stop the repossession from happening. The loan is defaulted, the car is going to be seized and trying to impede the repossession could result in further legal trouble for you.
After the Repossession
State laws and regulations for auto repossession differ the most in regards to what happens after the car is repossessed. In some states, the lender has to sell the car for its current fair market value and is only entitled to keep the amount still owed toward the loan. However, some states allow lenders to retain the full value of the car. Additionally, if you owe more than the car is worth you can be billed for the difference.
Your car is at risk for repossession as soon as you fall behind on your car loan payments. Carefully look over the default terms in your financing agreement and make all your payments on time to avoid a stressful auto repossession.
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