Are you worried about missing your car payment due to job loss or reduced income during the Coronavirus pandemic? Many people are facing similar financial challenges, and it’s crucial to understand your options and rights when it comes to car repossession. It’s a stressful time, but taking proactive steps can help you navigate these difficulties and potentially avoid losing your vehicle.
Understanding Car Repossession During Coronavirus
While some lenders offered temporary relief during the peak of the pandemic, the general answer is yes, your car can still be repossessed during coronavirus if you fall behind on your payments. Although some lenders may have voluntarily paused repossessions at certain points, this was not a universal or permanent policy. Falling behind on your auto loan payments can lead to repossession, and it’s important to be aware of this risk.
Proactive Steps to Take If You’re Struggling to Pay
Instead of ignoring the problem, there are several proactive steps you can take to mitigate the risk of car repossession.
Contact Your Lender Immediately
The first and most crucial step is to contact your lender as soon as you anticipate difficulty in making payments or if you’ve already missed a payment. Many banks, credit unions, and auto finance companies are willing to work with borrowers experiencing financial hardship. They may offer options such as:
- Payment Deferral: Allowing you to delay payments for a certain period, adding them to the end of your loan term.
- Payment Renegotiation: Adjusting your payment schedule, potentially reducing your monthly payment amount.
If your lender agrees to any changes, always get the agreement in writing. This written confirmation is essential to protect yourself and avoid misunderstandings later.
Know Your State Rights Regarding Repossession
Car repossession laws vary by state. It’s essential to understand your rights in your specific state. Reach out to your State Attorney General or your local consumer protection agency to learn about the rules in your jurisdiction. State laws dictate:
- How and when a lender can repossess your vehicle.
- What actions a lender must take after repossession, such as notifying you and selling the car.
- Your rights to get your car back (redeem it) or any personal property left inside.
If a lender violates these state-specific rules during the repossession process, they may lose certain rights against you or even be liable to pay you damages.
Explore Car Loan Refinancing Options
Refinancing your auto loan could be a viable solution if you’re struggling with payments. Refinancing involves taking out a new loan to replace your existing one, potentially with more favorable terms. This could mean:
- Lower Interest Rate: Reducing your overall interest costs and monthly payments.
- Longer Loan Term: Spreading your payments over a longer period, lowering your monthly outlay (though you’ll pay more interest in the long run).
When considering refinancing, ensure you work with a credible lender or company to avoid scams. Alternatively, if your car’s value and loan balance allow, consider selling or trading in your vehicle for a less expensive one to reduce your financial burden.
Don’t Ignore the Problem: Communication is Key
Even if you anticipate missing a payment, do not ignore the situation. Avoiding communication with your lender will only worsen the situation. Lenders are more likely to work with you if you are proactive and communicate your difficulties. Ignoring the issue can lead to:
- Late Fees: Accumulating significant additional charges.
- Credit Damage: Negatively impacting your credit score, making it harder to borrow in the future.
- Repossession: Increasing the likelihood of losing your car without warning.
What Happens After Car Repossession?
If your car is repossessed, understand that this is not the end of the matter.
- Deficiency Balance: You might still owe money even after repossession. This is known as a “deficiency,” which is the difference between the car’s sale price at auction (often less than market value) and the amount you still owed on the loan, plus repossession fees.
- Legal Action: In most states, lenders have the right to sue you to recover this deficiency balance.
Consulting with an attorney can help you understand if you have grounds to challenge a deficiency judgment.
Conclusion: Act Early and Communicate
Navigating financial difficulties during challenging times like the coronavirus pandemic can be daunting. However, when it comes to your car loan, remember that you have options. The most important takeaway is to act early and communicate openly with your lender. The sooner you address the issue, the better your chances of finding a solution and avoiding car repossession. Don’t wait until it’s too late – take action now to protect your vehicle and your financial well-being.
For further information, refer to the FTC’s article on Vehicle Repossession and this blog from the CFPB for comprehensive guidance.
