As auto loan debt surges, so too do Americans who are struggling to meet these financial obligations. According to the New York Federal Reserve, more than 7 million people were 90 days or more behind on auto loan payments at the end of 2018. At the same time, auto loan debt increased by $584 billion. This marks the biggest increase since the federal reserve started tracking these numbers.
For many consumers, this could spell trouble. Typically, most auto loans are considered in default if the payor is 90 to 120 days behind on payments. When a car loan is in default, the lender has the right to repossess the vehicle.
However, there are ways to avoid getting your vehicle repossessed. Experts do not recommend trying to hide your vehicle because it usually does not work, and it is a crime to try to hide a vehicle from repossession.
Get your loan current
A lender will notify you if your auto loan is in default. If you have not received such a notice, you may be able to make your loan current and avoid repossession. You should review your loan documents, and make sure you pay all applicable fees. In addition to the payments owed, you may also need to pay late fees to get your loan paid up.
Negotiate with your lender
The best way for your lender to get their money back is to have you pay the loan. If they sell your car at auction, they will likely lose money on the vehicle. If you are behind on payments or fear you may become behind on payments, reach out to your lender. You could try to negotiate a lower monthly payment or agree to a higher interest rate. Sometimes, refinancing your loan helps lower a payment.
Sell your car
This option will only work if your car is not worth less than what you owe on it. If you are not underwater on your auto loan, you could sell it and pay off your loan. That will solve the issue of you not being able to afford your car payment. Maybe you could buy a cheaper vehicle, or plan to take public transportation.
Consider Chapter 13 bankruptcy
If you are behind on your auto loan, there is a good chance you are struggling to make other payments as well. Filing for bankruptcy may sound extreme, but often it is the best way to get out from underneath an overwhelming pile of debt. With Chapter 13 bankruptcy, you create a repayment plan for all your debt. Chapter 13 also allows you to keep most of your assets since you make an agreement to repay your debts to lenders. Filing for Chapter 13 bankruptcy can stop a foreclosure on your home and prevent your vehicle from getting repossessed.
Defaulting on your auto loan is a scary prospect. However, there are ways you can stop your vehicle from being repossessed and regain your financial independence.