Repossession doesn't have to be the end of the world. Eventually, with responsible money management, your credit will heal, and you will be eligible for financing again.
A repossession stays on your credit report for seven years, damages your credit score and is a big red flag to lenders. It's also possible that your car loan may be turned over to a debt collection agency, which could lead to a lawsuit, wage garnishment, and even more damage to your finances for years to come.
In most states, you have to pay off the entire loan to get your car back after repossession, called "redeeming" the car. The balance you would need to pay to redeem the vehicle might include extra fees and charges, including repossession and storage fees, and even attorneys' fees.
A repossession can stay on credit reports for up to seven years. According to Experian®, the seven-year countdown starts on the date of the first missed payment that triggered the repossession. But Experian says that once that time period ends, they'll automatically remove the account from your credit report.
With a recent vehicle repossession on your credit report, your odds of approval for a mortgage are poor, especially if your report shows a spotty payment history, collections and other negative items. You might consider working to improve your credit before applying for a mortgage.
One reason many people consider voluntary repossession is to protect their credit score. Unfortunately, giving your car to your lender is unlikely to protect your credit. Many lenders consider a voluntary repossession the same as an involuntary repossession, leading to a negative mark on your credit report.
Although voluntary repossession is a better option than having your vehicle repossessed against your will, it will negatively impact your credit score and history. For that reason, you should first consider other ways to make payments or give up your vehicle.
If you do manage to keep your car hidden from the repo company, the lender isn't going to give up. If the recovery company can't find your car, they contact the lender and let them know they are unsuccessful. Next, your lender is likely to take legal action.
Negative events like a car repossession can stay on your credit report for a long time, and there's no easy fix for credit repair. But, if you stay the course and practice good credit habits, you can start improving your credit. Eventually, those negative marks could go away.
Can I negotiate with the financial institution to prevent repossession or to lower the amount I owe? Yes, it's often possible to negotiate with your lender if you're facing financial difficulties. They may be willing to modify your loan terms, lower your interest rate, or even reduce the amount you owe.
The agent will usually be equipped with a duplicate key for the vehicle, but could also enter the car by picking the lock and hot-wiring the engine. In some states, lenders are not required to issue you a notice if they are about to repossess your car.
Negotiate with the creditor.
Immediately after repossession, you should contact your lender to see if they may be willing to work with you. Whether or not you will be shown any lenience is entirely up to the particular bank that you're dealing with, but you won't know unless you try.
A voluntary repossession will likely cause your credit score to drop by at least 100 points. This point drop is due to a couple of factors: the late payments that cause the repo and the collection account that is likely to result from it.
Voluntary repossession can make obtaining future loans more difficult. There is no difference on your credit between a voluntary repossession and an involuntary one. Future lenders may see this action as a risk factor, making them more reluctant to lend to you or offer you higher interest rates.
How long does CapitalOne take to repossess my car? Repossession law varies slightly from state to state and range from 3 to 5 months after you stopped making payments on your CapitalOne loan.
Some car dealers install GPS tracking devices on cars they sell. These trackers show the repo man exactly where your car is at all times. This means that if you miss one payment, the repo man might be able to track you down immediately to repossess your car.
There are a few methods they use to locate delinquent cars, including tracking devices, public records, databases and sometimes even good old-fashioned detective work. Many times, lenders will install GPS tracking devices in vehicles to help repossession agents quickly recover delinquent automobiles.
Yes, the repo company can chase you to try and get possession of the vehicle.
By voluntarily returning the vehicle, you are taking some responsibility for the debt you owe. For this reason, lenders may consider a voluntary surrender to be slightly less negative than a repossession.
Is a surrender better than a repo? A voluntary surrender is generally better than a repossession because it demonstrates that the borrower took the initiative to return the vehicle and resolve the issue. This proactive approach may be looked upon more favorably by future lenders compared to a forced repossession.
Ask for a Voluntary Repossession
Voluntary repossession allows you to return a car you financed without being subject to the full repossession process. This could spare you some credit score damage, though a voluntary repo could still be reported to the credit bureaus.
You can sell your car to get rid of it without hurting your credit. This is easiest if the value of your car is close to or above the balance of your loan. You could also transfer your current loan to another person if they're approved for financing and agree to take it over.
Having a repossession on your credit report can decrease your credit score by approximately 100 points or more. Keep in mind that someone with a FICO credit score of 669 or below is considered to be a subprime borrower, while an exceptional credit score is above 800.