If you are having trouble paying your car loan and have tried absolutely everything, from negotiating new terms with your lender to refinancing to selling to asking friends and family for a loan, to help keep you on track, you may face repossession.
Repossession laws vary by state, but in most states a car can be repossessed anywhere - both on and off your property - without notification. In some states, lenders can repossess your car as soon as you miss a payment, other states make the lender wait a certain amount of time.
Usually, you will receive a notice that you are late on your payment, telling you to pay right away. You may receive further notification, either through the mail or by phone. If you do not pay or ignore these notices, your car will be repossessed.
If you are in a situation where repossession is inevitable, you can voluntarily turn over the car to your lender. The only benefit to doing this is that you will not have to pay repossession fees.
According to the Federal Trade Commission, a company repossessing can take the car when it is on your property as long as they do not “breach the peace.” In some states, which means using physical force, threats of force, or even removing your car from a closed garage without your permission.
After your car is repossessed, you may have some time - usually around 30 days - to reclaim the car. In some cases, the lender may allow you to reclaim it by catching up on your payments, but most of the time you will have to pay off the whole loan.
Your car will then be sold at auction and most likely it will sell for less than the amount you owe. After the auction, you will still owe the amount on the loan plus a bevy of fees for the repossession, storage and even the auction. So you will still be paying for a car you no longer own.
If your car is repossessed, it will seriously damage your credit score and stay on your credit history for seven years. A repossession could knock anywhere from 50 to 150 points off your credit score. It will also be very difficult to get a new car loan, because lenders see you as a risk. If you can get a loan, you’ll pay far more in interest than you did on the repossessed car.