If you can’t pay off your car loan, you’re not alone

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Millions of people are struggling to repay their car loans.

Here are some options to consider if you belong to this group.

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COVID could be on your side for this

Between COVID and high levels of unemployment, more than 7% of all auto loans in the United States are on a deferral program. Skipping car payments can damage your credit score or lead to repossession of your car.

Because the pandemic has been financially difficult for so many people, many financial hardship programs have been streamlined. These programs are designed to help you when needed.

However, you must ask for help. Ignoring the problem is the worst thing to do.

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What steps should I follow?

  1. See what help your lender can offer you
  2. Keep in mind that repos usually occur after two or three months without payment
  3. Learn about auto loan deferral programs
  4. Talk to your bank about your options

What happens if I miss a payment and how does repossession work?

Your bank can start the repossession process the day after a missed payment. However, most companies offer their customers a grace period. Usually, the lender doesn’t even charge a late fee for ten days and doesn’t report it to the major credit bureaus for 30 days.

Anything beyond 30 days is very close to the possibility of repossession.

The repo company is using all the information they can find to track down the car and tow it to a secure lot. They also don’t need your keys to pick up the car. If they don’t have the keys, they will contact a locksmith to make a new set. But you will have to pay for it.

You will also need to reimburse the bank for towing costs and daily storage costs. Charges range from a few hundred to over a thousand. You are responsible for these charges whether you take your car out of the depot or not.

Repo companies cannot use physical force against you or your property to get the car. However, they may follow you to work or the store and wait until your car is left unattended.

If your car is repossessed, your lender will likely return it to you if you can make up for any late payments and towing or storage charges that have accrued.

If you decide that after the repo you don’t want it back, you may still owe money. The bank will sell your car at auction and apply that money to the car’s balance and repo fees. You will have to pay the rest.

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Here’s what not to do

  • hide your car from the bank/repo company – it will probably cost you more in the end
  • stop paying – it will catch up with you

If you are having difficulty with payments, know that there are options available to help provide financial relief.

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