When a car loan has gone unpaid for more than 30 days, it goes into default. Default loans are subject to penalties and late fees. If left unpaid for an extended period -- 120 days or more -- your lender will take steps to repossess the vehicle and recoup any losses. If your loan has moved into default, you may still be able to keep your car and settle up your account.
Contact your lender to explain your situation. Tell your lender why you are late with your payment. If your financial situation has changed for the worse, your lender may be able to help you with a payment plan or other option to bring the account up to date. You may have to supply proof of your financial status to qualify for any assistance.
Refinance the car if you are no longer able to meet with the conditions of your current loan. If your credit and income are still in good enough standing to obtain a new loan, you can finance the balance owed on your car and pay it off in a lump sum. Then repay the new loan at a lower rate and with a lower balance. The more affordable payments may be all you need to make the car debt manageable.
Research the current market value of your car. If it is close to the amount that you owe on the loan, consider selling it and paying the loan in full. Once the car is sold and the loan is paid, your credit report will reflect a positive payoff of the loan and you can go about finding another used vehicle or a new loan that is more within your budget.
Buy back your car or make arrangements to bring your account current if the bank has already repossessed your car. Your right to first bid at the repossessed vehicle will depend on your state of residence and the willingness of your lender to bargain with you. In the end the bank only wants its money and you only want your car so try your best to work something out and do not be afraid to talk through the situation with your lender in hopes of finding a solution.
- Any payments that are late 30 days or more can be reported to the three national credit bureaus -- Experian, TransUnion and Equifax. Once reported, the late payments have an immediate negative effect on your credit scores. Repossession and nonpayment are also reported but their effects are far worse.
- If your car is repossessed and sold at auction your financial responsibilities may still not have been met. The difference in price between what your car is sold for and what you owe on the loan is still yours to pay. This "deficiency" is payable to the bank and may be a subject of collection after the sale. You may also be liable for any early termination or penalties if stated in your contract.
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