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Minimizing The Negative Effects of Repossession

Repossession of an automobile, motorcycle, motor home, boat or other vehicle is damaging to an individual's credit score. Credit experts report that a repossession remains on a credit report for seven years after the original delinquency date. Obviously, such a reporting may negatively impact credit for the entire duration of the seven year period although these detrimental effects lessen over time.

The repossession of a vehicle does not terminate a person's responsibility for the financial obligation arising from the purchase (contract for the sale) of the subject motor vehicle. If a sale of the repossessed vehicle does not return a high enough price and yield sufficient proceeds to pay the entire loan balance, a deficiency results. This is typically the outcome in all but a handful of cases as the depreciation of a car typically exceeds any decrease in the loan balance caused by monthly payments.   

There is a possibility that the vehicle may be bought back at auction. Of course, any repossession fees would be added to the cost. As it is, financial circumstances which would allow this type of solution are rarely applicable to a consumer who has had a vehicle repossessed.

 A qualified debt collection attorney may assist the owner of a motor vehicle to negotiate with a car lender. It is always worthwhile to call the creditor to discuss any situation involving significant hardship. Contrary to some public opinion, car lenders do not want to repossess vehicles. Car lenders make money by charging interest for full-term auto loans that are completed by the consumer.

When a car lender has to repossess a vehicle, the vehicle is typically sold at auction for half of the contractual obligation or balance of the loan, which is an unfavorable result for a lender that makes its profit from interest over some defined time period. Thus, extending a loan often may be in the lender's best interest, which makes it beneficial to contact the lender to arrange an extension.

An attorney may help resolve an issue rather than any "wait-and-see" approach, thus avoiding any negative impact on personal credit because of repossession. Many car owners feel the urge to cease making payments when something goes wrong with a recently purchased automobile, especially if it is a new vehicle.

Once a vehicle is repossessed, a former car owner should work to rebuild credit by obtaining a secured credit card while continuing to make timely payments on any existing loans or credit cards. If another vehicle is needed, as is usually the case, while rebuilding credit, some car lenders provide financing to individuals who’ve had past repossessions. But such options carry higher interest rates since the loans are considered of a higher risk. Nonetheless, making payments on these types of new loans will help repair credit.

At Loan Lawyers, our South Florida consumer rights and debt defense attorneys help individuals with problems related to the payment of their debts. The experienced South Florida defense attorneys at Loan Lawyers are here to help you explore your options to resolve problems with the repossession of a motor vehicle. To schedule a free consultation at any of our three conveniently located offices, contact Loan Lawyers today by calling (888) FIGHT-13 (344-4813).

  • ABC News
  • American Civil Liberties Union
  • CBS 4
  • CNN
  • Daily Business Review
  • Florida Trend's - Florida Legal Elite 2014
  • Florida Trend's - Florida Legal Elite 2014
  • National Association of Consumer Advocates
  • National Association of Consumer Bankruptcy Attorneys
  • NBC News
  • National Consumer Law Center
  • The New York Times
  • Avvo
  • Avvo
  • Avvo
  • Avvo
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