When a bank or credit union lends an automobile loan, they take a security interest in the vehicle. This gives them the right to take back, or repossess, the car, motorcycle, or truck if payments are late.
The loan agreement, or installment sales contract, that you sign at the time of purchase details your rights if your car is repossessed. If you financed through the dealership, this document is called the Retail Installment Sales Contract, or RISC. It will state whether you must pay off the full balance of the loan, pay only past due payments, and pay for towing and storage fees.
Many times consumers may encounter financial hardship due to a job loss, illness, or death in the family. If there is a “default”, such as late or partial payments, a lapse in insurance coverage, or death of borrower, the finance company or bank may repossess your vehicle.
During a financial hardship, the lender may offer deferred payments, which are then applied to the end of the loan. It is important for the consumer to receive written confirmation showing this change to the original loan agreement. Since the terms of the loan have, in effect, been extended, the consumer needs to see how the lender has calculated any additional money to be paid at the end to satisfy the loan.
Never rely on a verbal agreement. Any changes to the original terms should be agreed upon in writing.