How to Save My Car From Repossession

Save your car from repossession.

Repossession is the unfortunate consequence of nonpayment. Before your situation gets to this point, there are several avenues to explore. An involuntary repossession occurs when the bank finds your car and repossesses it. A "voluntary repossession," which occurs when you bring the vehicle back, is not a better option. Both are avoidable. Many lenders have programs in place to prevent repossession, or you may find help elsewhere.

Instructions

1. Call your lending institution immediately. Let the bank know that you're having trouble making your payments and need help. The bank may allow you to skip several payments, extend your term or lower your payment for a certain period while you catch up. These options involve signing paperwork.

2. Sell your vehicle on your own. Call the bank to find out your payoff amount, including the interest added daily (per diem). Add the per diem every day until you sell your car to ensure the correct payoff amount. Research popular Internet appraisal guides, like Edmunds (Edmunds.com) or Kelley Blue Book (Kbb.com), to determine the value of your car. If you owe less than your car is worth, you can keep any profit from your sale. If you owe more than your car is worth, you must come up with the additional amount owed to release the lien and complete the sale of your car. Once the car is sold, bring the new owner to the bank to pay the balance due, which releases ownership to the buyer. Bring your title if you have it.

3. Apply to a bank other than your lender to refinance your loan. You can find another lender as long as your credit has not been significantly damaged from your nonpayment issues. Apply to local or national banks (which you can find online by searching for "refinance loan"). Once approved, you may have a lower interest rate and/or an extended term, which can significantly lower your payment. If you are unable to find approval through a lender alone, ask a close friend or family member to cosign a loan for you. A cosigner can help you get an approval with low rates, and in turn, lower monthly payments.

Tips & Warnings

• Call your bank as soon as possible, before your payments are too far behind. Otherwise, your financing institution may not be able to help.

• Consider bankruptcy after repossession to protect any finances you have left.

• If you are unable to save your car from repossession, you still owe the bank any money due after it sells your vehicle, if the vehicle is sold for less than you owe. If you do not pay, the bank is within its legal rights to sue you and put a judgment against you to collect the money.

• If you settle with the lender, any money that was initially owed beyond what you settled for is classified as income by the Internal Revenue Service. You must pay taxes on reported income. Check with a lawyer or your accountant for details.

References

• Edmunds: Auto Finance Tips; What To Do if You Can't Make Your Car Payment