Your lender has the right to hire a salvage company to repossess your vehicle if something goes wrong with your car loan, such as a default. Once collected, it is usually prepared for an auction and the proceeds from the sale of the car are applied to your car loan balance. Whether you are facing a repo or your vehicle has already been recovered, there is a lot you need to know so that you can navigate the process as easily as possible.

1. When can my car be taken back?

In some cases, your car can be repossessed as soon as you miss a payment – it all depends on the language of your auto loan agreement. In many states, your vehicle can also be picked up when your full coverage auto insurance expires. The recovery company can take your vehicle while you are working, shopping or just at home. If your car is in the open, it can be towed by the repo man.

Your lender is not required to notify you that your vehicle is going to be repossessed, depending on the state in which you live. But you may have received a notice of late or missed payments and impending repossession.

However, in most states, they must send you notices after you collect the car. If your vehicle has already been picked up, the notice should include information about when and where your car will be auctioned, since you have the right to bid on it.

Some states have created rules on what creditors can and cannot do during the COVID-19 pandemic. Your state may not allow a lender to repossess your vehicle during the pandemic, so check with the National Consumer Law Center (NCLC) to see how your state is currently handling car foreclosures.

2. Can I hide my vehicle?

It can be tempting to try and hide your vehicle from the breakdown company, but that only delays the inevitable. One way or another, the lender can find a way to get the car back in the event of breach of the loan contract or default of repayment. One of the only places where a salvage company cannot retrieve your vehicle is when it is in a locked garage or unit, as this is considered a breach of public order and a break and enter. However, anywhere else is fair play.

Experienced recovery companies know how to look for specific areas where a borrower can hide their car, such as nearby parking lots or local grocery stores. They usually get your address, and often, where you work. Using the Vehicle Identification Number (VIN) unique to your car, make, model, color and year, they can verify that it is yours and tow it away. Some vehicles have GPS tracking systems, and they could find your car that way – so hiding it is unlikely to work.

If you manage to hide your vehicle from the salvage company and they don’t return it, the lender can stop paying the salvage company and sue you. If they win, they can get a court order and get it that way. If they still can’t get the car back, they could sue you and get an order to garnish your paycheck for the loan balance.

3. Surrender or wait for the Repo Man

If you know that you are about to face repossession, you have the option of handing it over voluntarily instead of waiting for the recovery company to come.

While abandoning your vehicle might not seem like the best option, it can actually save you money and hassle. Since the repo company can pick up your car while you are on the move, you can choose to drop the vehicle off at the dealership at a time convenient for you. You can also take the time to remove your personal belongings.

Handing over your car to the lender can save you money because if the lender needs to hire a salvage company, you are responsible for paying that bill, not the lender. The cost of a salvage business can be around $ 75 to $ 300.

4. Payment of the balance of the deficit

Once a vehicle is repossessed, it is usually ready to be auctioned off. If it sells, the auction proceeds are applied to your loan balance. However, the auction proceeds may not be enough to cover the entire balance – whatever is left is called a deficit.

You are responsible for paying this deficit balance. Even if the car is sold, you are still responsible for the loan. Some lenders allow their borrowers to set up payment plans or arrangements to pay off the balance, but you may need to pay the entire balance in a lump sum. What you can arrange depends on your loan agreement, your financial situation, and what your lender can do for you.

For some, the deficit balance is too large to pay, and in some cases, they go for bankruptcy. Filing for bankruptcy is a big decision that can impact your credit reports for years to come. We therefore recommend that you speak to a bankruptcy or legal expert before making the decision to file for bankruptcy for the repossession deficit balance.

5. Your credit after a repo

After repossession, your credit score is usually quite damaged. For some, this could mean a drop of about 100 points or more in your credit score. Not to mention, if you have defaulted on your car loan and this results in repossession, any missed or late payments, as well as the repossession itself, can also harm your credit.

The good news is that time heals your credit reports and your score. A pension can stay on your credit reports for up to seven years. With each passing year, however, its impact diminishes.

Taking on new credit and making all of your payments on time is a great way to start bouncing back from a repo. Keeping your credit card balance below 30%, staying on top of all your bills is also a great way to improve your credit.

6. Avoid repossession in the future

The best way to avoid repossession is to make all of your payments on time and make sure your auto insurance doesn’t expire.

If you fall into a difficult financial situation, let your lender know! There’s a good chance they won’t want to go through the repossession process either. Some auto lenders offer deferral plans for borrowers struggling with unemployment or unforeseen emergencies like medical bills or temporary disability.

When you think you are missing a payment, contact your lender and let them know. The faster you act, the more options you have to avoid repossession.

7. Get another car after trade-in

Most traditional auto lenders may not be willing to approve a borrower with a repossession of their credit reports. Subprime lenders, also known as bad credit lenders, may not help borrowers with a repo that took place less than a year ago. However, some in-house finance dealerships don’t do credit checks, so a recent repo wouldn’t hamper auto finance if you sue those dealerships.

Subprime car lenders are registered with special financing dealers and they are equipped to help borrowers in difficult credit situations, such as a past repossession. Here has Auto Express Credit, we connect borrowers with closest resellers with bad credit loan options. To begin the process of getting back on the road, complete our auto loan application form. We will look for a dealer in your area!