How to Avoid Repossession of Your Vehicle

by admin on November 13, 2013

Vehicle repossession occurs when the borrower is unable to meet his monthly payments on a secured car loan. Thus the loan provider has the right to seize the vehicle in case of default.

Insuring Your Vehicle

Make sure that your car has collision and comprehensive insurance. Your financial institution may claim your vehicle if it is not properly insured. If the collateral, i.e. the car, sustains damages, it is jeopardized. Try to fix any minor problems in a timely manner so that your financial establishment feels that they can seize and resell the vehicle if you are unable to pay back.

Timely Payments

Obviously, making payments on time helps car owners to avoid repossession. Missing a payment or two doesn’t mean that your vehicle is at risk or you are in default. This depends on your loan provider and the contract terms. With some financial institutions, a payment that is 1 day late is considered a red flag, signaling that the borrower is about to default. With others, the period is 1 month or longer. Check your loan documents to find this out.

If you are late on your payments, it is important to pay all charges and fees. If you fail to do this, your financial institution may claim your vehicle because you are technically still in default. Even if you aren’t late, make sure you provide your bank with your correct contact details. The lender will contact you in case a problem occurs. If you cannot be contacted, the bank has the right to repossess your car. And if you experience financial difficulties, make sure you contact your lender to explain the reasons and try to work out alternative payment arrangements.

Missing the first payment makes a bad first impression. If you miss the first payment, this sends a signal to the loan provider that you are a risky borrower.

Borrowers in Default

If you are in default, what you can do is reinstate your car loan. You will avoid repossession in this way and even if the bank has seized your vehicle, you can reclaim it. Reinstating the loan means paying all past due amounts, along with any charges assessed by the bank. This procedure is known as “the right to cure the default”. Whether this option is available depends on your financial institution and province of residence. Even if you are allowed to reinstate your loan, you can do this only once.

 

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