A lender repossesses a vehicle when the borrower defaults on her loan agreement. A car repossession will lower a credit score significantly. In addition to the repossession, late payments and missed payments will also have a negative impact on a credit score.
Types
Vehicle repossession can be voluntary or involuntary. Either type of repossession will lower a score. An involuntary repossession occurs when the lender takes back the vehicle without consent from the borrower. In a voluntary repossession, the borrower agrees to surrender the vehicle. Whether the repossession is voluntary or involuntary, both will appear as a repossession on the credit report for seven years from the date of delinquency.
Effects
In addition to the repossession and late payments noted on a credit report, a repossession can have other credit consequences. Lenders sell repossessed vehicles at auctions to recuperate as much money as they can. Unfortunately, auction cars typically sell low, leaving the lender will a remaining balance. That remainder is the responsibility of the borrower. The balance will be reported as a debt owed on the credit report.
Considerations
Creditors are allowed to sue borrowers for the remaining balance for a repossessed vehicle loan. A deficiency judgement can be filed against the borrower. It is important for the borrower to show up at his court hearing to defend his position and request the balance be lowered or eliminated. Before a car is repossessed, borrowers should negotiate with the lender to defer a payment or request an extension.
0 comments:
Post a Comment