How to Avoid Car Repossession
How Can You Avoid Car Repossession?
If the COVID-19 pandemic has taught us anything, it’s that bad things can happen to good people with little warning. The loss of a job, or even a reduction in working hours, can start the ball rolling toward major financial problems. People having money woes can find themselves at risk of their vehicles being repossessed, which could further compound problems on several fronts. So, how can you avoid car repossession? The answer isn’t so straightforward. Our team did a little homework to provide as many answers as we can. If you find yourself in this position, contact a licensed insolvency trustee as soon as possible.
READ MORE: Can You Get a Loan After Bankruptcy?
What Should You Do If You Can’t Make a Car Payment?
When it becomes clear that you won’t have enough money to make your car payment, reach out to the lender immediately. Just like you don’t want to lose your vehicle, they don’t want to take it from you. Repossessing a vehicle is a lot of work for a lender with costs they’d rather not have. Calling the lender and explaining your situation could make it possible to figure out a solution that works for both parties.
Trying to work out a deal with the lender is especially important in Ontario. Provincial law says that a lender can seize the vehicle and sue the borrower for the money they’re owed. Other provinces have different repossession laws.
Some other strategies include:
- Sell Your Vehicle: If you can’t make your payments and you’re likely to lose your vehicle to repossession, you could try to sell it. This gives you the best chance of raising enough money to at least cover the loan’s balance. If there is positive equity to be had after the sale, you might even be able to keep some of the proceeds.
However, if the sale doesn’t cover the loan’s balance, you will still be on the hook for the difference.
- Voluntary Repossession: Falling behind on a car loan is likely going to hurt your credit profile. However, some of the damage might be mitigated by doing what is called a voluntary repossession. There will still be some negative financial consequences, but you might be able to avoid some headaches.
- File For Bankruptcy: As many as 1 in 6 Canadians file for bankruptcy each year. Filing for bankruptcy could free up some money to pay the loan because unsecured debts from credit cards goes away. A car loan is considered a secured loan until the vehicle is repossessed – then it becomes unsecured and can be discharged during bankruptcy.
If you have a repossession on your record, but you still need a safe, reliable, and affordable vehicle, make an appointment with Autohouse Kingston today. Our financing team has a lot of tools to use to help people in almost any financial situation.