A car loan is a secured loan. That means the vehicle acts as collateral and guarantees the lender will be repaid. If the lender is not paid back, it can repossess the vehicle. That means the lender sends someone out to take the car back.
Recently, my friend stopped making payments on her car loan. She’d made a mistake and bought a new vehicle, but couldn’t sell her old one for enough to pay off the remaining loan balance. Since she couldn’t afford two car payments and the lender was unwilling to work with her, she felt as if she had no choice.
After she stopped making those payments, she expected her car to be repossessed right away and thought that would be the end of it. But here’s what actually happened next.
It took a long time for the lender to come and get the vehicle
As soon as my friend fell behind on her car payments, the lender began trying to get in touch with her.
She spoke on the phone with the lender and explained her situation, indicating that she couldn’t afford the payments. While the lender urged her to try to get caught up, she simply said that she couldn’t do it and said that the car was in her driveway and that the lender could come and repossess the vehicle whenever it wanted.
Despite numerous phone calls asking for money over the coming months, the lender didn’t come and get the car right away or even with any speed or urgency. In the end, it took nine months from the time that she missed her first payment and the collection calls started until the time when someone actually came and repossessed her car.
This was a long period of time for the car to sit untouched in her driveway waiting for someone to come for it. During this time, the late payments were being reported on her credit report, sending her credit score plummeting. And interest and fees kept being added to the loan balance.
If you fall behind on your car payments, you’ll likely face collection calls and damaged credit like my friend did. But don’t worry that someone is going to break down your door tomorrow.
While you’ll begin incurring added costs right away and a lender can take your car back immediately, it has to comply with legal requirements to do so. In some states, this means the lender must provide notice before acting. And even if your lender doesn’t need to notify you first, it doesn’t want your car — it wants the money you owe on the loan. As such, lenders will usually make every effort to give you a chance to get caught up before they come for the car. So, expect it to take months for the car to disappear once you stop making payments.
My friend is stuck with a bill that the lender expects her to pay
Once the lender eventually repossessed my friend’s car, she had some possible options, including acting within the time period allowed in her state to pay the past due balance and fees and recover the vehicle (the laws differ on this depending where you live). She didn’t have the money in her bank account, nor did she want the car anymore, so she just let the lender repossess and didn’t fight it.
When the tow truck came to her house, she had her belongings out of the car since she was expecting it. If you don’t, you should contact your lender about getting your property back ASAP after the car is taken.
She also had her car ready and waiting for them, and many people don’t in this situation. The good news is, lenders are also often subject to rules on how they can act when repossessing a vehicle. For example, state laws may prohibit them from getting the car from an enclosed garage without permission. And they can’t damage your property or cause a disturbance when trying to recover the vehicle.
While the repo people took my friend’s car without issue, that was not the end of the story. Sometimes, after a repossessed car is taken and sold, money is still owed on the car loan since, after all, the car is often worth less than the loan balance. If that’s the case, as it was for my friend, lenders may be able to collect the remaining amount, which is called a deficiency balance. They can even go to a debt collector or to court to try to get the money.
It’s important to realize that you may still have to pay the bills for a car even after a lender takes it from you. If you are in danger of having your car repossessed, reach out to your lender ASAP to see if there are any options it can offer to help you avoid these undesirable outcomes and a major impact to your personal finances as a result.
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