When you surrender a vehicle, known as voluntary repossession, you must still pay your loan balance if the bank doesn't recoup its total loss when reselling the car. A repossession, whether voluntary or involuntary, doesn't excuse your contractual responsibility to pay the loan's total balance.
Determining the Difference
Once your vehicle is resold by your bank, you'll receive a letter stating the amount your vehicle sold for and the balance you owe on the loan. Before the bank sells the car, you'll receive a letter that states the date of the car's sale. If you don't receive confirmation of the sale up to two weeks after the planned sale date, contact your bank to find out the amount you owe. The vehicle may not have sold the day it went to auction, but the lender will likely attempt to sell the car again the following week.
Other Fees
The amount you owe to the bank includes the loan's payoff amount and any additional fees the bank incurred from the resale process. If you surrendered the vehicle but allowed your lender to pick it up with a tow truck, you'll have to pay repossession fees. Repossession fees usually include storage and collection costs, which often exceed $1,000. Expect to also pay fees the lender incurred for preparing your car for resale, such as washing and detail costs. If your vehicle was damaged, the vehicle will sell for less than trade-in value, which is similar to wholesale cost at auction.
Arranging to Pay Your Balance
No matter how you pay your loan balance, the repossession will remain on your credit report for a term of seven years. If you pay the balance in full, your credit report will reflect a paid balance. After you receive a letter stating the amount you owe, contact your lender to make a payment arrangement that works for you and your budget. Determine how much you can afford to pay each month and contact your lender with your offer. Make your payments on time to avoid further collection activity.
Settling Your Balance
Your bank might accept less than you owe toward your loan. Contact the lender and try to negotiate your balance, although the bank is more likely to accept a lesser offer if you pay a lump sum to satisfy the balance. If the lender doesn't accept the agreement, it will sell your debt to a collection company for a lower cost. Debt collection companies can often take less than the amount owed. Once you settle the amount you owe, your credit report reflects a settled balance, which is viewable to future lenders.
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