It is well known that if you do not make your car payments on time and on a regular basis, you face the possibility of having your car repossessed by your lender. When you purchase the vehicle and agree to financing, your lender places a lien on the vehicle’s title. Should you, or any vehicle owner, default on the terms of their loan, the lienholder can legally take possession. This is something you definitely want to avoid.
Reasons To Avoid Repossession
The big reason you want to avoid having your car or truck repossessed is because it leaves you without a vehicle. That car or truck is most likely your transportation to and from your job. Without a vehicle, how will you get to work?
A repossession will also damage your credit history. Your payment history is one of the biggest factors in your credit score. Failure to make those payments will bring your credit score down and make it very difficult for you to borrow again in the future. The repossession will stay on your credit report for seven years, discouraging creditors from lending to you.
Strategies You Can Use To Avoid Repossession
Lenders want to avoid repossession at all costs. It costs them too much time and money. With that in mind, there are a few things you can do to avoid having the lender take possession of your vehicle. One easy solution is to sell the car. Now, you may not be in a situation where you can sell. The vehicle might be your only source of transportation. It is also possible that you may owe more than what the vehicle is worth.
Another strategy is to opt for a restructuring of your car loan. Approach your lender and ask if your loan can be restructured. The lender is more inclined to re-work your loan since it does not want to deal with a future repossession.
If your car is relatively new (10 years or newer), in good condition, and you have plenty of equity, you could consider a car title loan. Lenders such as Embassy Loans of Florida will use the car as collateral pay off the balance of your existing loan and develop a new loan with more favorable terms. If you have a second vehicle, this may be a solid option.
Avoid having your car repossessed at all costs. It will do great damage to your credit history. Talk to your lender if you believe you will have a problem with the payments. Your lender wants to avoid repossession just as much as you.