What Is Auto Repossession?
What Is Meant by Auto Repossession?
If you miss your auto loan payments, it makes you default on your loan. In that case, your creditor has the right to take your car back at any time. Not to mention, the auto repossession can impact your credit report for a longer time.
During repossession, your leasing company or lender that has the lien of your vehicle can take your car if you are behind in your monthly payments. In several states, the lender can even hold your car as soon as you miss a single payment. In Florida, your lender doesn’t have to give any notice to seize your car. But they don’t have any authority to threaten or physically force you. If this happens, the lender needs to pay the penalty and compensate the damages if they occurred.
On the other hand, some states ask lenders to send the notice before repossessing your vehicle. This notice should have detailed information about when you miss the payments. They also need to give you a deadline to pay off the payments. Besides that, your lender can also use a starter interrupt device. They do this to deactivate your car remotely. Although repossession policies can differ from state to state, your lender doesn’t have the right to bring a tow truck to possess your vehicle. Generally, the lenders also have to return all the belongings you have in your car.
How Can Repossession Hurt Your Credit?
The following are some ways in which vehicle repossession can impact your credit.
· Late Payments
If you get into auto repossession because you miss a payment, the late payment label will stay on your credit report for seven years from the original late payment date.
If you still owe a great amount of money on an auto loan, your lender may hand this matter to the collection agency. Again, the collection amount will remain on your credit report for almost seven years.
· Court Judgment
If you don’t pay your loan to a collection agency or auto lender, you may have to face legal actions. This can remain on your credit report for seven years but could remain on your public court records up to ten years depending on state laws.
How Long Does Repossession Stay on Your Credit Report?
Repossession can stay on your credit card for almost seven years from the day you stopped making monthly minimum payments. They are a red flag for your credit scores. You may even have to face a significant toll on your finances.
If you default on your dues for 30 or more days, the creditor can report your account as delinquent. After that, you may face more problems, as they can take the matter to the debt collection agencies. All of these things can lead your credit score to plummet. Not to mention, it will also hamper your ability to borrow money in the future.
Lastly, you need to understand that you still owe a deficiency balance after getting into the repossession. This is a loan amount left after the creditor sold the collateral, such as your car in this case. If your outstanding balance is more than they can get from the sale or auction of your vehicle, you will have to pay for the remaining amount.
Auto repossession is one of the challenging matters to deal with, as it impacts your entire financial state. This is why it’s better to pay at least monthly minimum payments to prevent this problem. Inquire now for questions and answers regarding your credit repair journey.