If you're struggling to make your car payment, you can potentially avoid repossession and the consequences that come with losing your vehicle by contacting your lender as soon as possible. This is going to be more possible if you do so before you ever miss a payment.

How to Prevent Repossession

This is something we can’t stress enough: reach out to your lender before things get out of hand! Even if you’re unsure about what the future holds, talk to your lender if you worry that you aren’t going to be able to make a car payment and fear a repo.

Depending on your how you’ve paid in the past and a few other factors, your lender may be willing to help you avoid repossession. After all, the repo process is just as tedious for them as it is for you.

Although there isn’t a guarantee your lender is going to help you avoid a repossession, there are two common ways they might typically help:

  1. I Can’t Make My Car Payment Anymore, How Can I Avoid Repossession?Loan deferment – With a loan deferment, your lender allows you to skip a payment or two. The skipped payments are tacked on to the end of the loan term, or added to the following month’s payment.
  2. Refinancing – If you’ve had the loan for at least a year, haven’t missed any payments, and have improved your credit score, your lender may suggest refinancing. When you refinance, you replace your current loan with a newer and hopefully better one. With refinancing, you can lower your monthly payment by extending the loan term or by qualifying for a better interest rate.

If, after you’ve discussed your situation with them, your lender explains that they can’t help you, you’re still going to be on better terms. It’s important to speak up and keep them in the loop, regardless of the outcome of the situation.

Actions That Don’t Prevent Repossession

You may have heard about car owners surrendering their vehicle to avoid repossession. You do avoid some big repo fees when you give up the car, but the reality is that you’re performing a voluntary repossession.

This means a repo still gets listed on your credit reports, and your credit score is negatively impacted. It doesn’t matter if your vehicle was surrendered – a lender isn’t going to see that you voluntarily gave up your car, they just see “repossession,” which is a big negative mark on your credit.

Another way you may have heard of to avoid a repo is by filing a Chapter 13 bankruptcy. It’s true that once you file a Chapter 13, an automatic stay goes into effect immediately, preventing your lender from coming after you and your vehicle. However, unless you’re struggling with other financial issues, filing bankruptcy shouldn’t be your go-to option to avoid repossession.

The process of going through a Chapter 13 bankruptcy takes either three or five years. You get the chance to avoid a repo, but your credit is still impacted, since a Chapter 13 bankruptcy is listed on your credit reports instead of a repossession.

The Bottom Line

Reach out to your lender as soon as you think you might miss a payment to give yourself the best chance to avoid repossession. At the same time, don’t immediately consider filing a Chapter 13 bankruptcy – you may be surprised by what your lender is willing to do to help you.

If it’s too late and you either had your car repossessed or you filed bankruptcy and you need another vehicle, let us help. At Auto Credit Express, we match car buyers to local dealerships that know how to help people in unique credit situations get financed.

Start the process today by completing our auto loan request form online, and we'll get to work for you.