Are you anxious about missing your car payment due to job loss or reduced income during the COVID-19 pandemic? Perhaps you’re already behind on your payments and worried about repossession? You’re not alone. Many individuals are facing similar financial hardships. Here’s what you should know and what steps you can take to protect yourself.
Understanding Car Repossession During COVID-19
The COVID-19 pandemic has brought about widespread financial challenges, and concerns about car repossession are valid. While some lenders showed leniency at the height of the pandemic, it’s crucial to understand that yes, your car can still be repossessed during COVID-19 if you fall behind on your auto loan payments. Lenders are generally within their rights to repossess vehicles when loan agreements are breached, regardless of external circumstances like a pandemic. However, knowing your rights and acting proactively can make a significant difference.
What to Do If You’re Worried About Car Repossession
Facing potential car repossession can be stressful, but taking immediate action is key. Here are crucial steps to consider:
Contact Your Lender Immediately
The first and most important step is to communicate with your lender. Banks, credit unions, and auto finance companies may have options available to assist you. Many lenders are willing to work with borrowers who are experiencing temporary financial difficulties. This could include:
- Payment Deferral: Allowing you to postpone payments for a certain period.
- Payment Renegotiation: Adjusting your payment schedule to a more manageable amount.
If your lender agrees to any changes, ensure you get the agreement in writing. This documentation is vital for your protection and to avoid misunderstandings later.
Understand Your State Rights Regarding Repossession
Car repossession laws vary from state to state. It’s essential to know your rights in your specific location. You can find this information by checking with your:
- State Attorney General: They can provide information on consumer protection laws in your state.
- Local Consumer Protection Agency: These agencies are designed to help consumers understand their rights and resolve disputes.
State laws dictate how and when a lender can repossess your vehicle and what must happen afterward. Lenders who violate these state-specific rules may face penalties or lose certain rights against you.
Explore Car Loan Refinancing Options
If your struggle is due to high monthly payments, refinancing your auto loan might be a viable solution. Refinancing involves replacing your current loan with a new one, ideally with more favorable terms such as:
- Lower Interest Rate: Reducing the overall cost of the loan and your monthly payments.
- Extended Loan Term: Spreading payments over a longer period, making each payment smaller.
When considering refinancing, be cautious of predatory lenders. Stick to credible lenders and companies. Another option to consider, depending on your car’s value and loan balance, is selling your car or trading it in for a less expensive vehicle before missing payments.
Don’t Ignore the Problem – Take Action
Ignoring the issue is the worst thing you can do. Even if you anticipate missing a payment, don’t avoid communication with your lender. Proactive communication is crucial to exploring available options and potentially avoiding repossession. Missed payments not only lead to repossession risk but also result in:
- Late Fees: Adding significantly to the amount you owe.
- Credit Score Damage: Negatively impacting your creditworthiness, making it harder to borrow in the future.
What Happens After Car Repossession?
If your car is repossessed, it’s not the end of the financial implications. You should still be aware of your rights and potential further obligations.
- Buying Back Your Car: Check your state’s laws regarding your options to repurchase your vehicle after repossession.
- Personal Property: Understand the process for retrieving any personal belongings left in the car.
Furthermore, repossession often leads to a deficiency balance. This is the difference between the car’s selling price at auction after repossession and the remaining amount you owed on the loan, plus repossession-related fees. In most states, lenders have the right to sue you to recover this deficiency. Consulting with an attorney can help you understand if you have grounds to challenge a deficiency judgment.
Key Takeaway: Communication is Your Best Tool
Navigating financial difficulties and potential car repossession during or after COVID-19 can be challenging. However, remember that you likely have more options than you realize. The most critical step is to communicate with your lender as soon as possible. Early and open communication significantly increases your chances of finding a workable solution and avoiding car repossession.
For further information, review the FTC’s article on Vehicle Repossession and this helpful blog post from the CFPB: Worried about making your auto loan payments? Your lender may have options to help!
