How Can I Erase Repossession Automobile Debt?
Repossession is an extremely negative mark on your credit. No matter what the circumstances that led to repossession, you now have to face the fact it is on your credit report and will prevent you from obtaining new credit and maybe even a new job if the potential employer runs a credit check. This means you must do whatever you can to remove the repossession from your credit history.
The First Step in Recovering from a Repossession
The first thing you should do if your car has been repossessed is contact your lender. If you are not aware why they repossessed your vehicle, the lender will be able to shed light on it. In some situations, the lender had no right to repossess the vehicle. This is where having your contract in front of you is very helpful. The contract will spell the terms under which a default may occur.
Make sure you read all the documents and understand what your rights are and the role of the lender in the process before you make the first phone call. You must also make sure you have all records of payment amounts, method of payments, dates of payments, and the information about your account.
If your car was repossessed because your defaulted on the payments, you should still be proactive in your approach. Many lenders are more than willing to work with you to resolve the situation. You can resolve more by talking on the phone than you can by ignoring the situation. The lender can’t help you if you don’t reach out.
The Difference Between Secured and Unsecured Automobile Debt
In most cases car loans are secured with the lender placing a lien on the car title until it is paid in full. Although not as common, some car dealerships do offer unsecured car loans. If you obtain the more common secured car loan, and you are unable to make the payments, the lender can repossess the vehicle. In an unsecured loan, the lender does not have this option since the car is not collateral for the loan.
Some of the differences between a secured and unsecured auto loan include the following:
- Unsecured auto loans usually have shorter repayment terms.
- Unsecured auto loans may come with fixed or variable interest rates.
- It is more difficult to qualify for an unsecured auto loan.
- Secured auto loans offer longer repayment terms.
- Secured loans typically have a fixed rate of interest.
- Those with poor credit find it easier to qualify for secured auto loans.
While an unsecured loan provides security for the buyer against repossession in case of default, this is reserved for those with the best credit. Another factor to keep in mind is an unsecured loan is easier to settle if default occurs, whereas a secured loan requires repayment of the debt, loan modification, or legal action by the creditor.
What is an Automobile Debt Settlement?
Auto loan debt settlement is a process whereby you or a third party negotiate with the lender to reduce the amount you owe on your car. This negotiation process usually involves creditors or debt collectors, but it could be done through the creditor as well.
This action is not free of risks, however. While it is tempting to use a debt settlement company to reduce your debt, there is a possibility you could come out owing more money or having a negative mark on your credit. There is also the possibility the lender will refuse to accept a lower amount than what you owe on the loan.
How Does Automobile Debt Settlement Work?
In most cases the consumer will look to a debt settlement company who will negotiate with the lender for a payment plan or agreement to accept a reduced amount to settle the amount of your debt. With an auto loan, this is likely to be something that occurs after repossession when the vehicle sold for less than the remaining balance on the loan. Debt settlement companies usually charge a fee to negotiate on your behalf.
The company may attempt to negotiate with the lender for a settlement amount that is lower than the balance owed. During the negotiation period they may insist you make regular deposits to an account that you can control but a third party assumes responsibility for its administration. This allows you to save money, so you have it when the creditor and debt settlement company reach an agreement. They will also advise you not to make any payments during negotiations.
Just because your lender repossesses your car doesn’t mean you do not owe them any more payments. In many cases, the amount the lender receives after a repossession sale is less than the balance you owe. This deficiency balance is your responsibility, and the only way you can avoid it is to file bankruptcy or negotiate with the lender to pay a lower amount than what you owe. Unfortunately, even a settlement will affect your credit, but it also relieves you of the stress and fear the lender will sue you for the balance. You have to weigh your options and decide what is in your best interest. Credit-Yogi can help you decide the best way to handle your individual situation. Simply fill in the form on the website, and one of the experts will return your call as soon as possible.