What Happens If My Car Gets Repossessed?
Getting a car can be a very exciting moment in anybody’s life, especially if it’s your first. But before making any major big ticket purchases, it’s always important to crunch the numbers and ask yourself, “Can I afford this?”
In the case of car purchases, unless you’ve paid for it upfront, it’s likely that you bought it with the help of a bad credit car loan In Oakville. While you’re the one who gets to enjoy the thrills of steering the wheel on your new ride, until you’ve fully paid off that car loan, that car isn’t technically yours yet.
Now, let that sink in.
If something isn’t really yours yet, there’s a chance it can be taken away. When it comes to car loans specifically, if you’ve taken out a bad credit car loan in Oakville, there are certain situations that permit the lender to repossess your vehicle from you. Obviously, nobody wants that to happen which is why every potential car buyer needs to inform themselves of these worst case scenarios so they can take action to prevent it from happening.
Why do cars get repossessed? What happens when they do? And is there any chance to get it back? We’ll be answering all those burning questions and more, so if you ever find yourself in this situation or close to it, you’ll know exactly what to do.
Why Does A Car Get Repossessed?
There are two different types of car loans buyers can opt for, secured or unsecured car loans. Whichever one you decide to go with will dictate whether or not your car has a chance of getting repossessed or not.
Getting a secured car loan is the most popular option amongst car buyers. When you apply, you have to provide the lender some sort of collateral — in this case, your car. In case you’re unable to pay back your loan, or consistently fail to make payments, secured lenders are within their right to repossess your car to recover the money they were unable to receive from you. Having this collateral not only holds the car buyer accountable for making payments, but it also assures the lender that they’ll be getting their money back, one way or another. Because of the collateral offered, interest rates with secured loans are much more affordable.
To completely eliminate your chance of repossession, buyers opt for unsecured car loans. While never having to give up your car can give you great piece of mind, it comes at a much higher cost as unsecured loans are known for having higher interest rates. This is to compensate for the fact that lenders have no collateral to fall back on if you end up missing payments. While unsecured lenders can’t take away your vehicle, they can send a collections agency to try and recoup their money.
So as you can see, the only ones that have to worry about repossession are car owners that go with secured lenders. This is something you only have to worry about when you fail to make payments or discover you can no longer afford your vehicle. Which leads us to our next part — voluntary and involuntary repossession.
Voluntary vs. Involuntary repossession
When people talk about repossession, they typically mean involuntary repossession. In this case, the lender sends a repo company to collect your car. There are typically towing expenses associated with involuntary repossession which will be expected to be paid by the car owner.
With voluntary repossession, you personally return the car back to the lender. While this might save you a little extra cash by avoiding towing expenses, there are no real benefits to voluntary repossession besides that. This doesn’t help improve your credit score in any way and you’re still required to return your car.
What To Do If You’re At High Risk Of Repossession
If you find yourself facing the real possibility of repossession, there are several vital steps you need to take to minimize the damage.
Get Real With Yourself
We all have that sixth sense or intuition inside us that lets us know when we might be approaching a sticky situation. When it comes to personal finances, things change all the time. Maybe you just lost your job recently, had to make an expensive purchase or simply struggling to make ends meet. Life happens and things change — sometimes what we thought we could initially afford is now causing a huge dent in your bank account.
If those monthly car loan payments are becoming increasingly harder to make and you think you’re slowly putting yourself at risk of repossession, it’s time to get real with yourself. Even if you negotiate a better payment plan, ask yourself — can I really afford this?
If the money you’re using to pay back your car loan is eating into money you need for typical living expenses, you may want to voluntarily give up your car. No matter your decision, make sure you crunch the numbers and don’t forget to consider other car expenses such as insurance, gas and regular vehicle maintenance.
Contact Your Lender
If you think you’re spreading yourself too thin financially and worry that you’ll struggle to keep up with loan repayments, call your lender immediately. Explain your situation and they might be willing to work with you by adjusting your monthly payments to something that’s more manageable. Before making that call, make sure you know your budget and what you’re able to afford going forward. That way the lender can come up with a new plan that’ll work for both of you.
Pro tip: This strategy can also work if your car has been repossessed already. There are no guarantees as every lender operate differently, but give it a shot. Be transparent about your current situation and be as calm as you can about the situation. Negotiate a new payment plan that you know you’ll be able to follow going forward and promise to pay back the payments you missed. Some lenders are willing to give you a second shot, but only ask for it if you’re able to commit to it.
Put Together A Payment Plan
As an extension to the last point, be sure to put a payment plan together if you feel you’re at risk of repossession. Sit down and take a hard look at all your finances — car related and others. Based on that, figure out what you can afford to pay back on your car loan and offer that figure when negotiating a new payment plan with your lender.
An alternative solution is paying off the loan in full. Sounds crazy right? If you’re feeling financially insecure, consider going to the “bank of mom and dad” or ask to borrow money from a close friend or family member to pay off the rest of the loan upfront. That way, you’ll owe them money as opposed to a lender. You can negotiate a repayment plan with them and you’ll no longer have to worry about losing your car again.
What You Need To Know When Car Gets Repossessed
If your car has been repossessed, it’s not the end of the world just yet. Here are some things to consider before you panic.
Make Sure You Don’t Still Owe Money
If your car gets repossessed you might still owe your lender money.
For example, lenders typically put the car up for auction in hopes to get back some of the money they lost. If the final bid doesn’t cover the cost of your loan, you’ll still be expected to pay back the rest. This balance is called a deficiency balance. While cars lose 10% of their market value as soon as they leave the dealership, if you believe your car was resold under market value, you’re able to dispute that in court and lower your balance.
No matter what, it’s always important to check the status of your loan even after your car is repossessed.
Know Your Rights
Even if your car gets repossessed, there are certain rights that you have that you should be aware of.
As awful as it may sound, repo companies actually have the right to go on your property and even into the garage to take your car. This is permitted so long as they don’t cause any damage to your property (i.e. breakdown a garage door) or cause any major disturbances in your neighbourhood.
With that being said, while the car is not yours, everything inside it is still your property and you have the right to get that back. While lenders are able to sell your car to try and recoup their losses, they’re unable to sell the possessions inside it. Keep in mind, this doesn’t typically include accessories or special additions made to the car, like a high-quality sound system.
If your car has been repossessed and you feel like your rights have been violated in any way, contact your lender and file a complaint immediately so there’s a record of the incident. Following that, be sure to contact a lawyer to see what the best course of action to take would be.
Check Your Credit Score
If your car has been repossessed, it’s likely that your credit score has taken a huge hit for it.
Once the dust has settled, check your credit score to see where it’s at and then take action to improve it again. Restore your credit by paying other bills you have on time. Once you feel like you’re back on track with your personal finances, try and diversify your payments by taking on other lines of credit including credit cards and loans. Credit bureaus like to see a diversity of accounts, but be sure you only take that on when you’re ready.
It’s important to note that this financial history will be visible on your credit report for about seven years. While this might look like major blip on your record, if you work hard on getting yourself on the right path again, your score will be able to rebound again.
Pro tip: If you’re worried you won’t be able to get a car loan again because of a damaged credit score, think again! Oakville Bad Credit Car Loans can help secure you a loan no matter how low your credit score might maybe. They work with their financial partners, some of Canada’s leading financial institutions, to come up with a plan that works for you. So not only will you be able to get back on the road again, if you make all those monthly payments, you’ll be able to rebuild your credit score in no time.
Take It Easy On Yourself
Getting your car repossessed can be a very hard and emotional experience.
Once it’s all over, be sure to take it easy on yourself. When it comes to money, budgets change especially with major changes in our lives. Whatever the case maybe, remember you’re not the first or last person to have this happen to them. As big a hit to the ego it maybe, remember to just take it as a learning experience.
See what you could have done differently so when you try again next time, you’re in the best position possible. Good luck!