When you sign on the dotted line to buy a new or used vehicle, you probably do so with the firm belief that you’ll capably make the payments. Within 36 to 48 months, you’ll own the vehicle outright; paying off the loan for a used car probably takes less time than that.

What happens if you can’t pay your bills though? Will they repo your vehicle? What Is Repossession? Will you go through a vehicle repossession like the ones you’ve seen on TV?

Let’s hope not.

You can do many things to prevent losing your vehicle and defaulting on your loan. These range from simply phoning the bank or credit union to explain the problem to refinancing the loan.

First, let’s look at why making timely payments matters so much. Next, let’s look at the many ways you can prevent a vehicle's repossession.

Making Timely Payments Matters To Your Credit Score

You can make or break your credit score in just six months. That’s how long it takes to raise your score by about 25 points by making on-time payments.

Just one late payment per year or every few years won’t hurt your score. More than that, however, it will drop your score. Two late or missed payments deduct points from your score.

That might not seem fair. It takes only two late or missed payments to mess up the score, but six in a row on time to increase it. That’s how it works though.

Making Timely Payments Matters To Keep Your Vehicle

You also can lose your vehicle to repossession by missing multiple payments. Typically, one missed payment won’t hurt you. You could lose your vehicle to repossession if you miss three payments though.

Now, the three-payment rule doesn’t apply universally. In the US, each state makes its own laws regarding the repossession of a vehicle.

You Have Many Options

When you find yourself in jeopardy of missing a car payment, you have options. Some of these may seem obvious and unlikely, but they work.

If you obtained your vehicle financing through your auto dealer, you’d call or visit them.

Calmly and pleasantly explain what has occurred. If you experience a medical emergency or another genuine emergency, such as damage to your home due to a storm, let your financial lender know this.

Let them know what you’re doing to recoup the money. You may only need a few weeks because you’re waiting on a reimbursement check from your insurance company. You might have taken a part-time job as a second job to earn extra money so you can make up for the expense.

You need to show the financial lender that you will catch up on the missed payment quickly. You also need to show that you are not simply ignoring the loan agreement.

When you request a loan deferment with an auto loan, it differs from a deferment with a student loan. In relation to an auto loan, a deferment simply tacks the missed payment onto the end of the loan. Think of it like a balloon payment on a mortgage.

Let’s say you’ll need to miss more than one payment and you know that. Perhaps you’re in the hospital, but your spouse needs the vehicle to drive to and from home to the hospital to assist with your care. Your spouse has no job, or their job doesn’t pay enough to handle all the bills. Your workers’ compensation pay only provides about 40 to 60 percent of your typical pay, so you need to reduce the bills while you cannot work. Request to refinance the loan. If you lengthen the loan’s repayment time, it will reduce the payment amount although you’ll increase the interest you pay on the loan. Although the latter fact sucks, you will keep your vehicle.

With your auto loan financial institution’s permission, you skip one month’s payment. You then make a double payment the following month.

So, if you need to skip July’s payment, you make two payments on the August due date. That might turn your $200 car payment into a $400 payment in August, but it can save your vehicle from repossession.

Good Communication Makes Everything Better

The real key to all of the issues of potential repossession lies within the communication. When you reach out to your auto loan institution as soon as you know you will miss a payment, you stave off the anger and frustration they could feel. By communicating honestly, you let them know what happened, the steps you took to rectify the problem, and how soon you can resume regular payments.

What Is Repossession?

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