Buying a car is one of the biggest financial investments that one can do. Even though having a car is very convenient, but the down payment along with the payment of loan installments can be a headache to deal with.
The value of your car will wear off with time, in other words, it will get depreciated. But the loan value remains the same, with no change in the liability whatsoever. So what happens when you cannot pay the installments on time? You cannot sell the car of course, because the value of your vehicle will be lower than the amount you owe.
The company will surely take your car in their possession. This will leave you car-less, under unpaid debt & the bad credit. But you can better your bad credit after the possession, here’s how.
The car is repossessed when you do not pay your payments on time. The company will possess your vehicle, but the time period of such possession will differ from state to state. Inquire the state or area where you live in and find the applicable legislation.
There will also be an agreement signed by you and your lender. The agreement will discuss repossession in detail. You will be given a figure of the amount that you must have to pay to get back your possession. If you fail to pay that amount too, then your car will be sold at an auction. Before going into further details, we would like you to visit https://creditrepaircompanies.com/repossessions/ for detailed analysis of your struggle and finding instant solution.
Effects on your credit score:
The defaults that you make in your car loan payment get mentioned on your credit report. This, in turn, has a negative impact on your future borrowings and tells the lenders that you are not a respectable borrower.
The impact shows up for 7 years. The severity lessens over time. But at the initial phases, your loan applications and credit card requests will get rejected often.
Getting the repossession removed from your credit report:
The repossession can be removed from your report before the period of 7 years. The procedure is quite simple. File a dispute with the credit bureaus like any other negative item. If your lender does not verify or does not give information regarding the repossession, then it will be removed from your report within 30 days of the filing.
The best way to avoid repossession is to communicate with your lender. Discuss the matter with your lender and let him know the difficulties that you are having.
The creditor will help you in two ways. Firstly, he will offer you to extend your time period or secondly, he will lower your interest rates if your credit is good.
We will advise you to take the second option if possible. The first option is nothing but an additional payment of interest stacking up on you over a more extended period.
The creditor will add the new terms on your agreement, and the new terms will be followed subsequently. This is better than getting your car repossessed.
Pay the deficiency balance:
Unfortunately, even if you get your car repossessed and the car is sold in an auction, you still have to pay the deficiency balance (if any). If the payment from the auction was lesser than your debt, then you have to pay the remaining amount.
This following payment will boost your credit score and will help you gain some loans to finance your living.