When you fail to make payments on a loan, you may be in danger of losing some of your personal property through a repossession, depending on the nature of the loan. When you miss a car payment, for example, your car may be taken from your driveway and sold to pay off your car loan. If you’re facing this possibility, you may wonder, “How many missed payments before repo?”
But how many car payments can you miss before your car is repossessed? Can your lender repossess your vehicle after your first missed payment? How can you get your repossessed vehicle back? In this article, we’ll take you through how repossessions work, as well as what you should do if you default on your auto loan.
If you are struggling to avoid car repossession, or you just can’t seem to afford your monthly car payments, filing for bankruptcy can help relieve you of your debts and can even help you keep your car. The Louisville bankruptcy attorneys at O’Bryan Law Offices can help walk you through the process and help you find a solution that works best for you and your situation. Call us at 502-339-0222 to schedule a free consultation with an experienced attorney from our team.
How Do Auto Loans Work?
If someone wants to buy a car but can’t afford to buy it outright, they may apply for an auto loan. They will then pay the lender in monthly installments to pay off the car. Each month that they pay, their auto loan balance will decrease until the loan is paid off.
When they sign the loan agreement, they agree to certain terms, including what will happen if they miss payments.
What Is Repossession?
When someone misses a payment on a secure loan, their lender can seize, or repossess, that secured item and sell it to pay off the remaining balance on the loan or credit account. Car loans are almost always secured loans, meaning that if someone fails to uphold their end of the agreement, their lender can seize their car and sell it to pay off the loan.
How Many Missed Payments Before Repo?
The number of car loan payments you can miss before repossession can vary depending on your lender. If they are more lenient, they may only attempt to repossess your car if you have three or more missed car payments. If they are more strict, they may repossess your vehicle after just one missed loan payment. Even if your lender is more flexible and understanding, missed payments can still negatively affect you. If you miss a car loan payment, it can appear on your credit report and stay there for about seven years.
Could I Be at Risk of Repossession After One Missed Payment?
Yes, you can have your car repossessed even if you’ve only missed one loan payment. While some lenders may only attempt to repossess your car after multiple consecutive missed payments, others may not be as lenient.
How Will Late Payments Affect Your Credit Score?
Lenders can report late car payments to credit bureaus, which can immediately harm your credit. While late payments won’t affect your credit score as negatively as missed payments, they can still be detrimental to your credit rating, especially if it is overdue by 30 days or more. Additionally, the longer it goes unpaid, the bigger the consequences. If you know you are behind on a car payment, it’s crucial that you contact your lender and make arrangements to get it paid as soon as you can.
Does My Lender Have to Tell Me Before They Repossess My Car?
No, if your lender decides to repossess your car, they do not have to provide you with a notice before they attempt to repossess it. Lenders are only required to give you a notice before they repossess your car if it is explicitly stated somewhere in your loan agreement. If they do provide you with a notice, you’ll have a window of time where you can either prevent repossession or get your car back before it’s sold.
What to Do If You Miss a Car Payment
Regardless of how it happened, a missed or late payment on a car loan can negatively affect you and your credit score. So, it’s important to pay attention to your monthly payments to make sure they process correctly. If you have a late or missed payment on your car loan, there are a few things you should do to avoid consequences like car repossession. This can include negotiating with your lender, examining your options, and adjusting your budget to ensure you can make your car payment each month.
Contact Your Lender
One of the first things you should do is contact your lender regarding the issue. Depending on your financial situation and how many missed payments you have, you could work something out with them to avoid repossession.
If you have a missed payment and you are able to pay it, contact the lender and request that they re-process the payment. Suppose you have automatic payments set up. There may have been a technical issue that caused the loan to go unpaid.
If you have missed a payment and you can’t afford to pay it for whatever reason, talk to your lender and discuss extending the due date or waiving the late fee. If you are going through a period of financial hardship, your lender may be willing to help you, but you may have to provide them with proof of hardship.
Even if your lender cannot help, talking to them can prove that you are committed to paying off your loan, which can help them be more understanding regarding your situation.
Examine Your Options
If you have one missed payment and can’t pay it this one time, you may be able to request a loan deferment. Car loan deferment allows you to temporarily stop making loan payments, which can help you gather enough money to make the payment and cover the late fee, if there is one.
If you miss a monthly payment and you know you cannot keep up with your payment plan, you may want to defer the missed payment and then evaluate your other options, like loan modification or voluntary repossession. Modifying your car loan can help you restructure your loan term, lower your interest rate, or even change the type of loan.
Depending on how many car payments you’ve missed, or how unforgiving your lender is, repossession may be hard to avoid. Voluntary repossession allows you to forfeit your car and prevent wage garnishment or involuntary repossession, both of which can affect your credit report. This option also allows you to remove your belongings from your car and make transportation arrangements.
Look at Your Budget and Find Out If You Can Pay
If you miss one payment on your auto loan, consider evaluating your current financial situation and adjusting your budget. Inflation can make it difficult to cut spending, especially if you have a family, but if you can, adjusting your budget can help you avoid repossession and make your monthly payments.
Are You Struggling to Pay Off Your Car Loan?
If you are struggling to make your monthly car payment, consider refinancing the car loan. By refinancing your loan, you can extend the amount of time you have to pay off the loan, which can help lower your monthly payment cost. Additionally, if your credit score has improved since you first received the loan, you may find a new loan at a lower interest rate than your current one.
If you are still struggling with paying off your loan after refinancing, consider trading your current car in for another one. If you want to keep your current car, you may also want to consider bankruptcy, which can potentially protect your car from repossession.
How to Get a Repossessed Car Back
Many people place a lot of sentimental value on their personal property, so it’s not surprising the lengths to which some people will go to keep their car. While car repossession can be difficult to deal with, it doesn’t mean that you’ll lose your car for good. In fact, there are a few things you can do to get a repossessed car back and even improve your credit score. Under Kentucky law, you can reclaim your car at any point in the repossession process as long as you do it before the car sells.
Reinstate the Loan
After repossession, consider reinstating your loan contract. Reinstatement often requires you to provide a lump-sum payment to cover the outstanding loan balance, as well as any late fees or repossession fees the lender incurred in the process. If you think you would still be unable to keep up with their proposed car payment plan, you may be able to negotiate with your lender to reach a more feasible agreement.
Pay Off Your Car
If your car has been repossessed, and you are able to pay off the entire car loan as well as any late payment fees or repossession costs, you can get your car back without having to reinstate your loan. This is a much more expensive alternative to reinstatement, but it can help you get your car back without making payments in the future.
Buy the Car at Auction
If you are unable to reinstate your loan or pay off your car before it goes to auction, you can buy your car outright at auction. Your lender will provide you with notice of the sale, as well as the time, date, and location of any public auction so that you can bid on your own car. While you may still have an outstanding loan balance after the sale, you’ll at least have your car back in your possession.
How to Stop Vehicle Repossession
You may have heard of various car repossession loopholes, but some of these tactics can harm you more than they help you. That’s why one of the best and most effective ways to stop repossession is by filing for bankruptcy.
Save Your Car by Filing for Bankruptcy
When you file for bankruptcy, you normally get a “stay” of collection activities. This means that creditors cannot proceed with collection efforts once you’ve filed for bankruptcy, allowing you to temporarily protect your assets, like your vehicle. Additionally, bankruptcy can relieve you of other debts, which can allow you to make payments and stay in compliance with your loan agreement.
Contact a Kentucky Bankruptcy Lawyer at O’Bryan Law Offices Today
Missing payments on your car loan can have serious consequences and can negatively affect your credit after missing just one payment. Don’t let missed loan payments ruin your life–if you are struggling to keep up with your current loans, contact the bankruptcy experts at O’Bryan Law Offices. We’ll walk with you through every step of the process and will ensure that you receive the best financial outcome possible. Call us at 502-339-0222 or contact us online and schedule a free initial consultation with us today.