If you’re behind on your car loan payments, it’s possible that your vehicle will be repossessed by the lender. Your vehicle is considered collateral under the terms of the loan agreement, so the lender has the right to take back the car or truck if there is a lapse in payments or terms of the agreement are broken.
If you’re suffering a financial hardship, often borrowers that have fallen behind on payments may consider whether to voluntarily surrender their vehicle instead of the embarrassment of a repo-man coming to their door. Either way, the repossession of a vehicle may impact your credit report negatively and make it difficult to get credit approval on an auto loan in the future.
What to Do Before Repossession
First and foremost, if there’s a chance that your vehicle will be repossessed, you should take the following actions in preparation:
- Remove all purchase and loan documents from the vehicle.
- Remove all personal belongings from the vehicle.
- Note the current odometer mileage.
- Take photographs of the vehicle’s interior and exterior.
- Request that the lender provide you with a written loan payment history.
- Request that the lender provide you with a payoff figure.
- Do not hide or conceal the vehicle to avoid a repossession.
This will ensure that you have all the information you need along with your personal belongings should a repossession take place.
How a Voluntary Surrender and Repossession Affect Your Credit
Many consumers who anticipate a repossession wonder if the consequences will be less negative if they voluntarily surrender the vehicle to the lender. The only significant difference between the two is the way they appear on your credit report; a voluntary surrender will be listed as such, but the negative effect will be about the same as a repossession. It’s possible, however, that the lender will be more willing to enter a loan agreement with you in the future if you voluntarily surrender the vehicle.
A repossession can stay on your credit report for up to seven and a half years. It’s a negative listing that lowers your credit score and it can make it more difficult to secure a new auto loan or line of credit.
Discuss Your Options with Your Lender
If you are having difficulty making payments, contact your lender as soon as possible. They may offer deferred payments, which are applied to the end of the loan. This can help you avoid repossession or voluntary surrender and prevent your credit from taking a further hit.
Facing a Car Repossession? Get help from an experienced Consumer Lawyer
Whether you have fallen behind on your car payments or not, there are legal protections for borrowers from lenders and repo agents that wrongfully repossess vehicles. Learn more about your rights and contact a qualified Consumer Protection Law Firm.