Do I still have my auto lender after repossession?
It is very possible that you owe money to your lender after repossession. While the vehicle is gone, you may have unfinished business to settle – a deficit balance.
What you may owe after repossession
Just because the lender took the vehicle doesn’t mean you’re done with the loan. In fact, you are still obligated to pay the lender what you owe, but maybe not all of it. Anything that is left after a repossession is called a deficit balance.
In a nutshell, it is the amount that remains unpaid after the lender takes back the car and sells it to recover some or all of the loan balance.
Once a car is taken back, it is usually prepared for auction. After a repo, the lender must inform you of the time and place of the auction. You have the right to attend the sale and to bid on the vehicle, according to the legal site Nolo.com.
If sold to someone else, the proceeds go toward your car loan balance. Anything that isn’t paid is yours to cover. If your vehicle does not sell at auction, it is your responsibility to pay off the loan balance as well as any additional costs incurred during repossession.
In addition to a deficit balance, other fees are usually included in the repo process. This typically includes the fees to be paid to the salvage company to tow the vehicle and storage charges accrued while the car was in storage pending auction. The lender doesn’t pay them – it’s up to you to cover them.
If you end up with a deficit balance, the lender will notify you of the total amount you owe.
Can I negotiate a deficit balance?
Many borrowers become unable to repay their car loan due to job loss or other financial hardship resulting in repossession, but it usually also means they are unable to pay the mortgage. deficit balance to the lender.
However, you may be able to work out a solution with your lender in some cases.
Lenders may be willing to negotiate with you, but they don’t have to. A lender may be willing to set up a repayment plan or offer you the option of paying only a percentage of the deficit balance. Much depends on how quickly you contact your lender and the language of your loan agreement as to what options are available after a repo.
If you can’t come to an agreement with your lender and you don’t pay the deficit, the account may be sent to a collection agency who will then attempt to collect the balance. Legal action from the lender is also possible if the balance is not paid promptly. It’s wise to stay in touch with your lender even after repossession to avoid further hassle for yourself and to know where you stand after repossessing your vehicle.
What is the next step after repossession?
Once the repossession is complete – towed car, auctioned, and balance owed paid – where does that leave you?
First, you could find yourself without a vehicle, which can be devastating. Second, your credit score may be worse for wear and tear. Repossession can significantly damage your credit score, and the mark stays for up to seven years. Any missed or late payments that may have led to the repo also stay on your credit reports for up to seven years. However, these negative marks lose some of their effect over time.
If you are looking for another car immediately after repoing, you may need to turn to in-house financing dealers. Most traditional and subprime lenders cannot work with borrowers who have repossessed a vehicle for less than 12 months. However, internal financing may not require a credit check.
Internal financing is done through dealerships Buy Here, Pay Here (BHPH), or catch all lots of used cars. These dealerships are also the lender, so all the buying and financing of the car is done in one place. Often you can choose a vehicle and finalize all the financing so that you can leave the same day with your car. Some BHPH dealers usually ignore the credit call, only asking you to provide proof of income, residence, identity, and typically require a down payment of around 20% of the car’s sale price.
Credit repair after pension
As we mentioned, a vehicle repossession can stay on your credit reports for up to seven years. It’s not ideal, but credit reports and credit scores heal over time. One of the best ways to bounce back from a repossession is to stay on top of your existing credit and bills to avoid future damage.
Your payment history is the most important factor in your credit score – 35%. While it’s fair to assume that anything you pay doesn’t get reported to the credit bureaus, there’s still a possibility that a missed payment on a utility bill will get reported and hurt your credit score.
And if you have a good payment history with your other bills, including streaming services, utilities, rent, or your phone, it may be worth considering credit reporting services like Experian Boost. . This service may be able to increase your credit score by getting accounts that are not automatically reported on your credit. The more accounts you have listed with a positive payment history, the better.
Get back on the road with a little help
Finding bad credit auto loan resources can be a hassle, but we want to help you Auto Express Credit. We have matched bad credit borrowers and special finance agencies over the past two decades and we want to help you too.
Start by filling out our free auto loan application form and we’ll search for a dealership in your area.