If you fall behind on your car payments, your lender can take the step of repossessing your car
It's difficult, but not impossible, to get a car back after it's been repossessed
Even if you get your loan reinstated, a repossession will negatively affect your credit score for years
If you finance a new or used car with the help of a car loan, you sign an agreement with your lender — whether it’s a bank, credit union, or car dealership — that they’ll loan you the money to buy back a car and you’ll pay them back over time, plus interest. Until you’ve fully paid off your car loan, your lienholder, or the party that owns your debt, has a financial stake in your car; your car is the collateral that secures the loan.
Basically, until your loan is paid off, it’s their car too. And if you don’t hold up your end of the loan agreement and make your payments on time, your lienholder can take possession of the car — that’s what’s known as a repossession.
If your car has been repossessed, it can feel like all your options have been exhausted, but there are still some steps you can take to get your car back. If it’s feasible for you, you can try to pay off your loan in full and get your car back that way. You may also be able to renegotiate a payment plan and start making your payments again.
But the key is to act quickly — if you want to get your car back, you’ll need to take action as soon as possible.
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As we mentioned above, when you take out a car loan you sign a loan agreement stating that you’ll make your payments in full and on time until you’ve paid off the loan. If you can’t do that and you become delinquent on your auto loans, meaning you fall behind on the payments, repossession is usually the final step your lender will take to get their investment back. Your lienholder may also repossess your car if you let your required car insurance lapse.
Technically, your lender doesn’t have to alert you before they repossess your car, meaning that if you default on your car loan, you may just come outside one day to find your vehicle gone.
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Usually, the lender will contract a repo company to go collect your car. Laws regarding repossession are different state-to-state, but generally, the repo company can’t breach the peace, meaning they can’t use force or threaten you in order to take your car. They may take a car from your driveway but usually can’t if the vehicle is in your closed garage. If you have questions about the repossession laws where you live, contact a lawyer who specializes in repossessions and debt.
Another important thing to note is that, while your lender can take possession of your car, any of your belongings that were in the vehicle when it was repossessed are still yours and you have the right to get them back. The repo agency should work with you to allow you to come pick up any of your property that was in the car.
After a certain amount of time, your lender may allow your car to be sold at auction. But auctions for repossessed cars may not earn your lender enough to fully pay off your loan, meaning you may still owe money on your auto loan even after your car has been repossessed and resold. If you don’t pay off the remainder of what you owe, your creditor may take you to court for the balance.
If you’re having trouble making your monthly car payments, the best time to speak to your lender is before you miss a payment. But that’s not always possible, and if you’ve missed multiple payments and your car has been repossessed, there are a few steps you can take to try and get it back. One of the most important steps to take is to reach out to your creditor immediately after the repossession and make it clear you want to work to get back the vehicle.
If you’ve already missed payments, this may not be financially feasible for you, but you can get your vehicle back if you pay off the rest of your loan balance in full. This is also called redeeming the car. That includes paying off all your delinquent payments, plus the remaining balance and any repossession costs you’ve incurred, including the costs for towing and storage on the lot where it's being kept.
If your car has just been repossessed, you may be able to pay back any payments you missed and reinstate your auto loan, which means you’d get your vehicle back and begin making payments again.
To see whether this is an option for you, speak to your lender about making a plan to reinstate your loan. Assuming it’s feasible, they’ll tell you how much you need to pay in order to have your loan reinstated — usually your missed payments plus any repossession costs.
Even if you’re able to reinstate your loan or buy back your car, a repossession will have a serious negative effect on your credit. Both late or missed payments will show up on your credit reports, and so will a repossession.
If your car is repossessed and then sold at auction, you may still owe money on it. And if you fail to pay off that balance, your debt may eventually go to a collections agency. Even after you’ve paid it back, having a debt go into collections will also ding your credit score.
Taking serious hits to your credit can make you feel hopeless, but don’t worry, these setbacks won’t stay on your record forever. Most of these entries in your credit history will only show up for seven years, so if you make all future payments on time and in full and don’t carry a credit card balance or incur new debt, you’ll be able to bring your credit back up.
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Anna Swartz is a Managing Editor at Policygenius, where she has been since 2018. An expert in home, auto and renters insurance, she loves making tough concepts easy to understand and helping readers feel confident about their insurance options. Before joining Policygenius, she was a senior staff writer at Mic. Her work has appeared in The Dodo, AOL, HuffPost, Salon and Heeb.
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