Some Tips to Avoid Having Your Car Repossessed
The rate of default on car loans reached an eight-year low of 1.03 percent in May 2012 — but even at that rate, millions of vehicles will be repossessed in the United States this year. Below are some tips to avoid becoming another casualty of the repo man.
1. Communicate. If your personal finances have suddenly tanked — or if you know you will not be able to afford your payment this month or next month for some other reason — contact your lender right away. Most lenders will make a number of accommodations to keep you as a customer in good standing.
2. Negotiate. Do whatever you need to in order to make your car loan fit you current financial circumstances. You may be able to refinance your loan, lowering your interest rate and making your monthly payments more affordable. You can try to refinance through your original lender or shop your loan around through an outside source. Your original lender may allow you to refinance at a higher interest rate but spread the payments out over a longer period of time. You will pay more in the long run, but your monthly payments will decrease.
3. Get help. If you can turn to friends and family who have a bit of extra money without souring your relationship with them, do so. If you really are dealing with a temporary setback and expect to be back on your financial feet soon, you are better off owing money to someone who knows you and cares about you than to an impersonal lender.
4. Consider bankruptcy. If your financial troubles are more than temporary and if you have other significant, unsecured debts you can no longer manage, you may want to seriously consider declaring bankruptcy. As long as you are fairly current on your car payments and agree to honor your car loan debt after the bankruptcy, you will be able to keep your car through and after the bankruptcy process.