If you are having trouble paying your car payment
and other bills you may want to make sure your car payment is a
priority. Unlike credit cards,
the creditor can come and take away your car. We all know that's
a big problem, especially if its your only source of transportation.
Your car can be taken away for a variety of reasons -- not just
because you're late on the payments. The creditor has a right to
have the car fully protected and that includes car insurance. By
not fully insuring the car, you are putting the creditor's asset
at risk. Just like a home requires mortgage insurance so does your
car. Your car can be repossessed for lack of adequate insurance
because the creditor owns the title.
Refinance Options
Beyond car insurance issues, payments have to be made on time. If
you are starting to fall behind you need to contact the creditor
right away. Letting the loan become delinquent is the worst thing
you can do. You never know when the repo man will show up and take
the car. If your credit is good, you may want to consider paying
the car off so that you own the rights to it. Many times when people
start to see a pattern that their bills are getting out of hand,
they'll strategize a plan to pay off their car with another loan.
With so many credit cards having special APR promos, you may be
able to pay off the car and lower the interest rate. Check your
car loan interest rate and compare it to a loan rate you could use
through your credit union, bank or credit card company. Once you
pay off the car with a new unsecured loan, there are no more
repossession worries. In addition, you may be able to lower
your insurance payments because you will no longer be required to
carry full coverage, which can be quite expensive. Also consider
looking into a person to person loan with a family member to pay
the car off. You'll now make payments to the family member rather
than the creditor and the car will be yours, legally and with full
title rights. Your payment will probably be smaller as well.
REPO = LOTS of Fees
Besides the worry of a repossession, you also have a lot of fees
to be concerned with should your car be repossessed. The creditor
has to not only pay a repossession company to track and pick up
the car -- which is costly on its own, but they also have to store
it until they either give it back to you or sell it. The car could
be sitting in storage for weeks or months and all the daily storage
fees will become part of your deficiency balance. People sometimes
think that once the creditor takes back the car that their obligation
ends. Anything related to the car will become your responsibility
and that includes costs to repair any damage, fees to sell the car
at auction, insurance coverage, repos fees and storage. You can
see where this is going. It makes no sense to let the car go into
default because you think you can just give it back and be done
with it. Although the deficiency balance will be unsecured (meaning
there is no longer any collateral to take back), you can still be
sued for the def balance and if the creditor knows where you work
then they may seek a judgment against you.
Can you get the car
back?
Yes and no. It really depends on the creditor. If you come forward
and pay the repo fees and bring the loan current, the creditor may
decide to give you another chance. They are not required to do so.
If they've had issues with you before or if they feel you are too
risky, then they may opt to sell the car -- especially if its in
good condition. Any leftover balance is still your obligation to
pay. Its a lose lose situation to pay for a car you dont have. If
you failed to negotiate a plan to bring the loan current before
repossession, then dont expect the creditor to just hand over the
car. While credit unions tends to be a little more lenient in giving
second chances, big banks are not. State repossession laws vary
so be sure to check yours.
Letting go of the
car
If you absolutely cannot avoid letting the car go, then the best
option would be to see if you can sell it private party and satisfy
the whole balance - or at least most of it. A private party purchase
will net much more than a dealer or auction sale. Dont wait until
the repo man comes looking for you either. All that will do is add
more costs to your loan. If you have decided to surrender the car,
then contact the creditor and make arrangements to give it back.
You'll save a lot on the repo fees which can be about a thousand
dollars. The creditor will take the car back and try to sell it.
If you've filed
bankruptcy, the deficiency balance can be included which means
you are not responsible for any left over balance.
What about my credit?
There's really no good news there. The defaulted loan will show
up on your credit reports as a repo. This is credit suicide if you
ever want to buy another car or even a home. Creditors understand
that people rarely default on serious life necessities so letting
the car go will make your financial situation look quite bad. It
will be hard to find anyone who will finance you again for a car
loan. Whether you turn the car in voluntarily or the creditor has
to repossess it, its still negative. Sure, a voluntarily surrender
may seems much better to you, but on paper, it means very little.
