Fallen a little behind on your car payments, or worried that you soon might? Below is everything you need to know about car repossessions, including what it actually is, how it works, and what the consequences really are.
How/Why Does Car Repossession Happen?
When you can’t or don’t make your car payments, you loan can go into what is known as default and your lender is alerted that you’re not keeping up your agreement to make payments in exchange for your vehicle. This, in turn, gives your lender the authority to take your car back and resell it to someone else to recover their money. In some states this can even happen without warning or court order as soon as you miss a payment, and Michigan is one of them. Michigan is what is known as a “self-help repossession state,” which means a lender can repossess a vehicle without warning so long “as the lender or its agent doesn’t breach the peace” in the process. From there, you have up to only 15 days to redeem your vehicle, which in itself can be a frustrating process.
How Does Car Repossession Affect Your Credit
Having your car repossessed can affect your life in a lot of ways, more so than just leaving you without a vehicle. If your car is repossessed because of too many missed payments, the late/missed payments can remain on your credit report for up to seven years after the fact, which is also the same length of time your credit reports will reflect that you suffered auto repossession, affecting future financing tremendously. Eventually, if you cannot pay off what you owe, your debt will be surrendered to a collections agency, which will also stay on your credit for up to seven years, even after the debt has been paid off. If you still refuse to pay from there, legal action can be taken against you and the courts will determine how to handle your unique situation from there.
Avoid Auto Repossession
While for some it may already be too late, for many there is still time to turn things around. There are ways to try and avoid having your car repossessed, such as keeping the lines of communication open with your lender, and letting them know when you’re struggling so you can work out a new plan together that benefits you both. You can also choose to get out while you can, meaning sell your car while it’s worth more than you owe and use the money to pay off your debt so you can start over before things really get out of hand. If your vehicle’s not worth much, you may want to consider “voluntarily surrendering” your car, which essentially means beating your lender to the punch to prevent a repossession from going on your credit report. It still won’t look good for your credit, but it will look a lot better than the alternative and show future lenders you know how to take responsibility. The two best ways to avoid auto repossession, of course, are to find the most affordable used vehicle you can from the start and try to pay with cash so you own it outright instead of owing a lending institution, and skip the responsibility entirely by utilizing as much alternative transportation as you can.
The important thing for you to remember is that no matter your circumstances, there’s always another way – and even if the worst does come to pass, Suburban Auto Finance will always be here to help you no matter what your credit looks like! If you are looking for the best in auto financing, no matter what your current credit situation is, choose Suburban Auto Finance and learn how we can help you get back behind the wheel in no time. At Suburban Auto Finance, we understand everyone deserves the independence of having a reliable vehicle, and our mission is to work as hard as we can to make that happens for you.