A vehicle repossession is something that no car owner wants to experience. Unfortunately, in some cases, it may be unavoidable.
When you lose your main source of transportation, it can create a snowball effect for you and your family. Without a reliable vehicle to get to work, you could land in a situation where you don’t have any money, which will lead to unpaid bills and further financial problems. And that’s not all – it also affects your credit.
Vehicle Repossession and Your Credit
The effect of auto repossession on your credit is comparable to having a collection on an account listed on your credit report. However, there is no specific amount your credit score will drop – that will vary depending on other factors on your credit report. And, while a voluntary repossession may help you maintain a good relationship with your current lender or dealer, both voluntary and involuntary repossessions affect your credit the same way.
If you have repossession on your credit, the best things to do are pay down balances on open accounts and settle the delinquent ones. At least you will be able to show future potential lenders that you are making the effort to manage your credit responsibly.
Further Financial Strain
In addition to credit, it may cause you additional financial issues. Once the vehicle has been repossessed, the lender will sell it in order to recoup as much of their money as possible. If the sale doesn’t cover the entire balance of the loan, you will receive a 1099-C for that tax year. The Internal Revenue Service will view the canceled debt as income, and you may need to pay taxes on that amount.
Options for Car Buyers with Repossession
If you have damaged credit due to auto repossession, car dealers will have trouble getting their F&I department to approve you for a loan. However, if the repossession was included as part of a bankruptcy filing, this may ease the process as long as you have all of the proper documentation.
For buyers where repossession was not included in a bankruptcy, the only available option may be a Buy Here Pay Here dealer, who bases their lending decisions on your employment, income and residence history and not your credit.
Choose the Right Path
Suburban Auto Finance works with car buyers who have experienced major credit and financial setbacks, and we are ready to do everything possible to get you back on the road fast. Complete our fast, free and secure online application today to see what we can do for you.