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How to Avoid the Repossession of a Car

Updated on May 1, 2012

In times of economic hardship it is not unusual for car owners to fall a bit behind on their payments. After all when folks are out of work and deciding which bills must be paid first, it is easy enough for some to slide on the car in favor of other necessities. That said, the note holder will eventually want either the payments or the collateral for the note (the car). Obviously this can be a frightening time for the car owner, but there are ways to avoid repossession. The commitment of the owner will dictate whether their car is ultimately reposed. These tips can help.

Determine your financial wherewithal

If you truly intend to avoid repossession, you must ultimately be able to make payments. Your first step is to understand where you are financially, and whether you have the means to cover the payments for a restructured loan. If it is clear that you can’t make the payments, it is probably best to work with the lender for an orderly repossession. However, if you do have the means, and a plan to move forward, you have a real shot at keeping the car. Put together a budget that lists all of your income and expenses and determine how much you can afford to pay on the automobile. This document will be very helpful as you work with your lender to pull your loan out of the hole.

Communicate with the lender

Schedule an appointment with your lender and take your newly created budget to that meeting. In your discussions with your lender, you need to be humble and take the responsibility for being late on your payments. Don’t blame others, just own it and move forward. Ask the lender what you can do to get your loan current. Often it can be as simple as asking the lender the question; “How can you help me work this out?” Ask the question then wait for an answer. If there is an awkward silence, let it sit. People respond to calls for help, so ask and wait for the answer. Discuss in specific terms what you have done with regard to your budgeting and how you have developed a plan to make good on the payments. The fact that you have a plan on paper will go a long way in working through an agreement. Finally, you must be prepared to make some payment during that meeting. Certainly note the full amount, but enough to prove you are serious about bringing the loan current.

Ask the lender for specific terms in writing

Most lenders are absolutely reputable, and have no interest in taking your car. After all they entered the contract to earn interest on the loan, not collect a car for resell. That said, there are a few lenders that use questionable tactics during their negotiation process. Therefore, it is imparative that you get all the terms of your negotiations in writing. Make sure that every discussion point is documented, and be assertive if something is unclear or missing from the terms sheet. Further, make sure that all the terms include a signature from the lender. Bad lenders are unusual, but with clear documentation outlining both the responsibilities of the lender and the borrower; you can be sure everyone understands the final agreement.

Be diligent in paying your restructured loan every month

Now that you have worked out a plan to keep your car, it is crucial that you meet your end of the bargain. The lender worked in good faith to help you work through your trouble, so you need to make good on your promise too. Beyond that, the lender will be especially sensitive to late payments on a restructured loan. They will give you far less latitude once you have had an issue. You have established some credibility with the lender by working in good faith through the restructuring process, it is now time that you prove the lender was right when they placed that second bet on you.

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