A repossession firm usually comes calling if you stop paying on your car loan. MSN Money writer Liz Pulliam Weston explains that banks and finance companies usually call in repossessors after 60 days, although your contract terms may allow your vehicle to be taken as soon as you default by missing just one payment. You can voluntarily turn in the car rather than waiting for the repossession firm to find you, although your credit is still damaged.
Definition
A repo refers to vehicle repossession, whether it happens involuntarily or voluntarily. The Federal Trade Commission (FTC) website explains that a creditor can repossess the car at any time without prior notice in many states if the car loan payments are delinquent. The repossessor may come on your property, if necessary, although you cannot be threatened or subjected to physical force. A voluntary repossession happens when you make arrangements with the creditor to turn over the car at a mutually agreed upon time.
Credit Effects
Both involuntary and voluntary repossessions have the same effect on your credit, according to the Edmunds automotive website. Other lenders see loss of a vehicle as a sign that you cannot manage bills, especially if you have other late or charged-off accounts. The MyFICO website warns that repossessions fall into the "payment history" part of your FICO credit score. Payment history makes up 35 percent of the total number, so a defaulted auto loan can drop your credit score significantly. Your bank or finance company can sue you for the difference between the loan balance and the amount of money it gets by selling your car, according to the FTC website, and that adds more negative credit report data.
Positive Effects
A voluntary repossession has some positive effects. You have time to get your personal possessions out of the vehicle rather than having it potentially disappear unexpectedly. The FTC notes that you also eliminate repossession costs that the lender would otherwise pass along to you.
Considerations
Sometimes you can legally escape paying the amount you still owe on your loan when your car was repossessed if the lender had it taken involuntary. For example, the FTC explains that you may have grounds to fight if the repossession firm did something illegal or the creditor did not sell the car in a commercially reasonable way or there was an unreasonable delay in suing you. Consider consulting an attorney about whether you may have a case.
Alternative
You can sometimes avoid a car repossession by talking to your lender as soon as you run into financial problems. The Edmunds website explains that creditors sometimes offer solutions, such refinancing or temporary payment deferment, depending on your previous payment history and delinquency reason. You may be able to sell the car and pay off the loan if its value is more than you owe.
0 comments:
Post a Comment