How banks deal with defaults on cars loans

How banks deal with defaults on cars loans

We are very dependent on vehicles as they make our everyday life easier and convenient. Whether it is a quick trip to the convenience store or a road trip across the country, we rely entirely on automobiles. Therefore, it is a given that people spend good money and invest in the best car.

Sometimes, people take auto loans to finance the purchase of their cars. However, if one doesn’t repay the loan on time or delays the payment, then that brings in trouble for the individual. In most cases, if the individual defaults a payment or does not have the required auto insurance, he or she is in the danger of having their vehicle seized by the bank.

The bank holds on to the vehicles for a period of time in the hope that the owners can actually make the payments and get their vehicles released. If not, the bank will hold an auction and put these pre-owned cars for sale.

Upon repossessing the vehicle, the bank may either decide to keep it as compensation for the debt or even sell it in a public or private pre-owned car sale. Some states require the bank to inform the original owner regarding what they intend to do with the vehicle. For example, if the vehicle is being sold at a public auction, the state law requires that the bank informs the original owner the time and place of the sale so that they can participate in the bidding if they choose to repurchase a pre-owned car. Also, if the pre-owned car is going to be sold privately, the owner has the right to know the date of the sale from the bank.

The original owner of the vehicle is entitled to “redeem” or buy back the pre-owned car under any of the circumstances by paying back the full amount and complete the sale. Usually, it includes the past due payments as well as the full remaining debt along with the expenses in connection to the repossession, i.e., preparation for sale, storage, and attorney fees. If not, the owner can try to buy it back by bidding on the vehicle at the pre-owned cars sale.

Some other states also have consumer protection laws that give the owner a chance to “reinstate” the loan. Reinstating the loan means that the owner can reclaim the vehicle by paying the amount that was defaulted on the loan, along with the creditor’s repossession expense. Upon reclaiming the vehicle, the individual must make sure to never again default payments of the loan and also meet the terms of the reinstatement contract in order to avoid the seizing of the vehicle.

If the vehicle was damaged during the owner’s use, the value of the vehicle will decrease. In this case, if the vehicle is repossessed, it does not satisfy the loan, and this liability falls on the owner’s shoulder. The individual will have to pay some extra money to cover the total cost of the vehicle.

perfect products for you

Helping you find the product you are looking for in your area

most popular blogs

are you looking for a car