Car owners with rough credit that are currently behind on a car loan and facing possible repossession can look to the Federal Trade Commission to explain their rights while also providing tips on prevention
What we know
It's been well documented that consumers with questionable credit that have taken out an auto loan are at a higher risk for vehicle repossession.
Here at Auto Credit Express we know this is true because for the past two decades we've been helping car buyers with bad credit that are searching for online auto loans find those dealers that can offer them the highest probabilities for auto loan approvals.
But at the same time, according to information from Experian Automotive, consumers financing a vehicle from a high-risk lender are roughly twice as likely to have that loan end in repossession versus buyers financing with a conventional vehicle loan.
With that in mind, we thought it would be a good idea to share some information from the Federal Trade Commission while keeping in mind that we don't presume to give anyone specific legal advice.
Here, then, is part one of that article (the second part will follow shortly):
Talking with Your Creditor
It's easier to try to prevent a vehicle repossession from taking place than to dispute it after the fact. Contact your creditor as soon as you realize you will be late with a payment. Many creditors work with consumers they believe will be able to pay soon, even if slightly late. You may be able to negotiate a delay in your payment or a revised schedule of payments. If you can reach an agreement to change your original contract, get it in writing to avoid questions later.
However, your creditor or lessor may refuse to accept late payments or make other changes in your contract — and may demand that you return the car. If you agree to a "voluntary repossession," you may reduce your creditor's expenses, which you would be responsible for paying. But even if you return the car voluntarily, you still are responsible for paying any deficiency on your contract, and your creditor still may enter the late payments or repossession on your credit report.
Seizing a vehicle
In many states, your creditor can seize your vehicle as soon as you default on your loan or lease. Your contract should state what constitutes a default, but failure to make a payment on time is a typical example.
However, if your creditor agrees to change your payment date, the terms of your original contract may not apply any longer. If your creditor agrees to such a change, make sure you have it in writing. Oral agreements are difficult to prove.
Once you are in default, the laws of most states permit the creditor to repossess your car at any time, without notice, and to come onto your property to do so. But when seizing the vehicle, your creditor may not commit a "breach of the peace." In some states, that means using physical force, threats of force, or even removing your car from a closed garage without your permission.
Should there be a breach of the peace in seizing your car, your creditor may be required to pay a penalty or to compensate you if any harm is done to you or your property. A breach of peace also may give you a legal defense if your creditor sues you to collect a "deficiency judgment" — that is, the difference between what you owe on the contract (plus repossession and sale expenses) and what your creditor gets from the resale of your vehicle.
For More Information
To learn more about your rights and specific repossession requirements in your state, contact your state Attorney General (www.naag.org) or local consumer protection agency (www.consumeraction.gov).
As we see it
We agree with the FTC's assessment that it's far easier and much less expensive to deal with repossession before it occurs rather than after it happens. So if you are currently having difficulty making your car payments, contact your lender as soon as you realize this might be a possibility. Secondly, if the lender does agree to a loan modification, be sure you get the terms of the proposed agreement in writing.
One more thing to keep in mind: Auto Credit Express specializes in matching applicants with auto credit issues to dealers that can offer them their best chances for getting approved auto loans.
So if you're ready to begin that process, you can start it now by filling out our online auto loan application.