Most lenders don't repossess a vehicle until car payments are significantly past due, often 60 days or more. Once your payments are reported as late and unpaid to the credit bureaus, it becomes difficult to obtain another car loan. Work with your lender before it seizes your vehicle or seek the help of a co-signer if you can't refinance the car on your own.
Before a Repossession
Your lender may have programs in place to help distressed borrowers avoid repossession. Under some circumstances, it's financially beneficial for the lender to modify your loan or defer car payments to help you satisfy your loan balance. As soon as you know you can't pay your car bill, contact your lender. Let your lender know that you're having difficulty making your payment and need help. Your lender might allow you to skip several payments without penalty and extend your loan term to offer a lower monthly payment.
Total Loan Deficiency
Once your vehicle is repossessed, you'll have to refinance the total loan balance to satisfy your old loan. If the lender hired a repossession company to seize the car, you'll also have to pay repossession fees, which often exceed $1,000. Expect to pay the car's loan balance, late fees, past due payments and repossession costs to refinance your loan. Repossession often occurs when a borrower owes more than his vehicle is worth, Trying to refinance a loan balance for more than a vehicle's worth might prove difficult.
Importance of Loan-to-Value Ratio
Lenders base a borrower's loan amount on a loan-to-value ratio. Depending on your credit and the lending value of the car, potential lenders may approve all or only a portion of your loan. If you have poor credit, you might obtain a loan approval for only 50 percent of the car's lending value. If you maintained other lines of credit besides your car loan, your credit may not have suffered badly, although each individual's credit rating is impacted differently by repossession and nonpayment. You may have to provide a large down payment to obtain a loan approval.
Considerations
Your past due payments are reported to the credit bureaus. When you apply for a loan refinance, potential lenders can view your late payment history and the amount of days you're past due. A lender may request that you pay your past due payments before approving your loan. After a repossession, your lender will notify you of the date it intends to sell your vehicle. Since loan approvals can take up to a week, you'll have to move quickly to refinance your vehicle. Submit a refinance application as soon as your vehicle is repossessed, and while you're waiting for an approval decision, search for a co-signer in case you need one.
0 comments:
Post a Comment