Everything seems perfect when you drive those brand-new, glossy wheels off the automobile lot. You cease making payments after something happens (a job loss, a maintenance problem that makes you doubt the dealer’s honesty, etc.). Those late payments can result in the repossession of your car rather soon.
According to a CNNMoney piece from March, 1.3 million cars were repossessed last year, down from 1.9 million at the height of the recession in 2009. But if you’re one of the millions of automobile owners whose vehicle was repossessed, it could negatively affect your credit.
Quick Tip: Research your credit score on creditsesame.com to understand how a car loan may impact it. Creditsesame.com currently offers a free online credit score check without affecting your credit report card. CreditSesame.com also offers free credit monitoring and identity theft protection, as well as monthly updates to your score, so you can keep track of, manage, and safeguard your credit and identity. There is also no need for a credit card or trial.
Auto repossessions, in accordance with Experian, remain on your credit report for seven years from the initial delinquency date. Your credit may be badly impacted for the seven years, but over time, the effect reduces.
Naturally, just because you stop making payments and lose your car doesn’t mean that you are no longer liable for its debt. You would still owing a deficiency balance if the car’s auction price fell short of the remaining loan sum. If you have an auto repossession, you could alternatively buy the car back at auction and cover the fees associated with the repossession, but most people don’t have the money on hand to accomplish that.
Here are some actions you can take to stop a repossession or recover after one.
Talk to your auto lender about a deal. Due to a layoff or other financial trouble, speak with the financing firm before you abruptly cease making payments. Robert Raffi, an attorney specializing in vehicle fraud at Consumer Action Law Group in Los Angeles, explains that when financial institutions offer loans, they do so in the hopes that the borrower will repay them by repaying the loan in full. The financial corporation doesn’t really want to repossess that car because, in most cases, these vehicles are sold at auction for only half of the amount owed under the contract. Make arrangements with your financial institution and potentially ask them to extend the loan.
Consult a lawyer. Do not stop paying if you are inclined to do so because you believe that you have been deceived regarding the condition of the vehicle. In many cases, hiring a lawyer can help you fix the problem without damaging your credit through a repossession. Pauliana Lara, an auto fraud lawyer with Consumer Action Law Group, believes that purchasing a car is a very emotional experience. “When a customer visits a dealership, they assume everything is in order. However, they say, “I don’t want to pay anymore,” when things go wrong. I strongly advise Joe Consumer to contact an attorney when dealing with a finance firm and a dealership. We will help them the best we can.
Attempt to repair your credit. You will need some time to rebuild your credit if your car is repossessed. You may, for instance, apply for a secured credit card and make an effort to maintain making prompt payments on any loans or credit cards that you currently have. Raffi advises looking into finance organizations that offer financing to persons who have had prior repossessions if you need another vehicle to get to work while you’re rebuilding your credit. Even though new auto loans typically have higher interest rates due to the additional risk involved, making your payments on time could help you improve your credit.