Repo Round the Corner
We all know the feeling of opening up your banking app or website and having a notification that your car payment is late. Your stomach sinks, heart drops, and all you can think is, “oh crap!” The good news is that there is usually a grace period before your payment is actually considered “late,” and paying your loan a few days late is not going to end up in repossession. The bad news is this can negatively affect your credit and your reputation with the lender. If you really are in danger though, what steps do you take to avoid a repo, and what exactly does it mean for you?
The first thing you should know about repos – nobody wants them to happen. Your lender does not want to take your car back. There is a very long, very expensive process behind it. On average, lenders lose at least $5,000 every time a car is repossessed. The buyer faces severely damaged credit and is left without a vehicle. Long story short – everyone loses in the situation.
With that knowledge, it should come as no surprise that the next tip is to communicate with your lender. Life is hard. Job changes, family changes, even something as small as a high electricity bill can throw off someone’s entire budget off. If something comes up and you are going to miss a payment, tell someone. Peach State Federal Credit Union offers a Skip-A-Pay Program that gives you a chance to catch back up with your bills. Once again, lenders do not want to take your car. Call someone and let them know so they can help you.
You still have to pay for the car. This comes as a shock to most people. If your car is repossessed, the balance of the loan doesn’t just disappear. Once your car is taken, it is sold either at an auction or through a dealership. Whatever is left on the balance of the loan after the sale (plus any repossession fees) is called a deficiency balance. You are responsible for this balance. If you don’t want to pay it, the lender can garnish your wages until the balance is satisfied!
All in all, repossession is one of the most severe blemishes you can receive on your credit – and you can face the negative effects for seven years or longer. That means that any money you borrow is instantly going to be more expensive (if your loans even get approved), because you are seen as a high-risk borrower.
There are many routes you can take to avoid repossession, and the simplest of all is to call your lender and be honest about what you are going through. They are not there to take your car or your money from you, and they will do their best to help you out.
If you have any questions about repossessions, including how to avoid or recover from one, feel free to call one of Members AutoChoice’s knowledgeable sales professionals.