If your bank fails, any loans you have with it -- such as auto loans or personal loans -- will be sold to a new lender, and you'll make payments to that lender. Watch out for a notification from the FDIC and whatever lender purchases your loan within a few days of the news of your bank's failure.
The bottom line
When a car loan is charged off, you're still responsible for repaying the debt. You'll likely have to deal with a third-party collection agency. Your car can be repossessed, or you could be sued for repayment.
This means that: You are stuck with it – if the lender doesn't come to pick up the car. You can't sell it – because the lender still has the lien, and selling it would be committing a theft. You must keep it – you can't junk it or give it away either.
Possession Rights After Charge-Off: A charge-off is primarily an accounting action. It doesn't change the lender's rights to the collateral, in this case, the vehicle. The lender or their assignees may still have the right to repossess the car if the loan agreement allows for it and if state laws permit.
While neither scenario is good, in most cases, a charge off is better than a repossession. When a car is repossessed, the lender not only gets to keep the money you've already paid, they take your vehicle and you will still owe the deficiency balance after the vehicle is sold.
If you default on your auto loan, your lender will likely repossess the vehicle unless you surrender it voluntarily. A repossession can compound the damage done to your credit by your late payments and make it difficult to get approved for another auto loan for a while—or other types of financing like a home loan.
No, a repossession agent may not do that. But, if the repossession company can't access your car because it is hidden, blocked, or locked up, your lender goes to court to get a replevin. Replevin is a court order compelling the collection of the vehicle. Repossession and replevin are different processes.
If you don't have the funds to redeem the vehicle by paying off the loan in full, you might be able to get the car back through reinstatement. To reinstate the car loan, you bring the loan current by making up all of the past-due payments, including applicable fees and late charges, in one lump sum.
They can sue you for the balance you didn't pay for the down payment, but unless it was in the contract they can repossess, the law in CA doesn't allow it. Under California law, a breach of contract occurs when one party fails to fulfill a legal duty the contract created and causes damages for the defendant.
In many states, your vehicle can be repossessed without any advance notice from the lender. While repossession can occur after a single missed payment, most lenders wait until you're 30 to 90 days behind on payments. That means you can face repossession after you've missed one, two or three payments.
Another option is to give up the vehicle to the lender voluntarily rather than going through the repossession process. The lender may find this option appealing because it avoids the costs of repossession, and it may agree to reduce or eliminate the deficiency balance on the loan.
Can I trade in or sell a car that has been charged off? If your lender charges off a secured auto loan but doesn't repossess your vehicle, you likely won't be able to sell it or trade it in.
Loans not sold at the time of the bank's closing are packaged and offered for sale through various means (e.g. cash sales, securitizations, and other structured sales) to the broader financial market, typically within a few months of the bank's failure.
Each state has a different statute of limitations on car repossession debt, including auto loans, with most ranging from three to six years.
Installment accounts: A closed installment loan, such as a personal loan or auto loan, could be a loan that you paid off in full. Or, if you fell behind on loan payments, the account might be closed and transferred when it's sent to collections.
Paying off a car loan early can cause a slight dip in your credit scores, depending on your credit profile. Any dip is likely to be temporary as long as you're practicing responsible credit habits with other accounts.
Often, a bank or repossession company will let you get your car back if you pay back the loan in full, along with all the repossession costs, before it's sold at auction. You can sometimes reinstate the loan and work out a new payment plan, too.
The bottom line. While it doesn't happen very often, it is possible to be denied a car loan even after taking possession of the car. To minimize the odds, try not to make any major changes to your finances or credit until your loan is finalized, including not changing jobs, if possible.
If your car has a tracker, repo agents can pinpoint its exact location at any time, which makes repossession faster and easier for them. License plate scanners are another tool repo agents use. These devices quickly scan license plates while cars drive through neighborhoods, parking lots, or other public spaces.
A repo agent will pursue a vehicle for however long the lender is willing to pay for the services before taking some alternate form of action, such as a replevin.
Yes. Providing they didn't climb over a fence because the gate was locked, anyone can approach your house from the street and knock on your door or ring your bell providing you haven't asked them to leave or you don't have a restraining order against them.
Talk to Your Lender
Tell them you're struggling and ask if they have a relief program available. Some financial institutions are willing to pause payments for a month or so without penalty, especially if you always pay on time.
Once you are 30 to 90 days late on your repayments, your lender will likely say that your loan is in default. Once you're in default, the lender may be able to repossess your car anytime, without notice, and come onto your property to take it.
One way to get out of a car loan is to sell the vehicle privately. If you're not upside down on the loan, meaning the car is more valuable than what you currently owe on it, you can use the proceeds of the sale to pay off the current loan in full. Another term for an upside-down car loan is negative equity.