Quick Answer: Car repossession occurs when lenders reclaim vehicles due to missed payments, and the borrower remains liable for any remaining balance after the car is auctioned. Nicole’s $4,500 title loan grew to $5,400 with a $2,000 refinancing option, but the repossession likely won’t damage her credit more than the existing delinquency already has.
Question:
Dear Steve,
I took out a $4500 car title loan and fell past due.
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I dodged answering my phone when falling behind, and recently a few days ago, my car was repossessed by the company with all my personal/confidential possessions inside.
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To refinance the loan, I’d have to pay $2000, and the entire balance owed is $5400. I called the creditor/title loan office to get details- Which I do not have right now.
I contemplated finding a larger loan to pay off it all and only pay 1 loan by the date I know I can afford to pay monthly.
I’m worried that the repo will hit my credit, which will drop my score drastically, which I worked hard to bring up.
I am in the process of qualifying for a home, and I definitely rather save my credit than have a large blow. What should I do?
What should I do? What is the brutally honest truth in a wise way to approach this situation?
Nicole
Answer:
Dear Nicole,
You can click here to get a copy of your credit reports, so you know exactly what the damage is that you are dealing with.
I don’t think it is the repossession you need to worry about hurting your credit score because before you got to that point, you were already delinquent on the account. The lender could have been reporting that for many months.
Following a repossession, you should anticipate being sued for the vehicle loan’s remaining balance after it is auctioned off for very little.
I’d also discuss the situation with your mortgage broker and let them know what is going on. The repossession may change everything.
I predict you will have to deal with the repossession and loan delinquency to satisfy it, so the mortgage company is happy. But I don’t want to assume that.
Call your mortgage agent or broker immediately and be open and honest. They will be the best-qualified person to help you get across the mortgage hurdle.
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