What happens to a car owner’s credit score after repossession?

What Happens When a Car Gets Repoed

Repossession is not a new phenomenon in the auto industry. It happens when a car owner fails to make payments, and the lender or creditor takes possession of the car. When a car gets repoed, a lot of things happen that can affect the car owner and the lender. In this article, we’ll explore the process of repossession and what happens next.

The Repo Process

The process of repossession differs from one lender to another, but it usually follows a similar course of action. When a borrower misses a payment, the lender will start by sending reminders and late payment notices. If the borrower still does not make payments, the lender will send a final notice of repossession.

After the final notice, the lender will send a repossession agent to take possession of the vehicle. The agent will tow the car away and take it to a storage facility where it will be held until further notice. If the borrower wants to get their car back, they can contact the lender and arrange to pay the outstanding balance and any repossession fees.

The Impact on the Owner’s Credit Score

When a car gets repoed, it can have a negative impact on the owner’s credit score. The lender or creditor will report the repossession to credit bureaus, which will lower the owner’s credit rating. This can make it harder for the owner to get credit in the future and may lead to higher interest rates on loans and credit cards.

Selling the Repossessed Car

The lender can sell the repossessed car at an auction to recoup some of the money they lost when the borrower stopped making payments. The car will be sold as-is, and it may have damage or other issues. The lender is not required to inform the buyer of any issues with the car, so buyers should be cautious when bidding on a repossessed vehicle.

Legal Action by the Lender

If the sale of the repossessed car does not cover the outstanding balance owed by the borrower, the lender may take legal action. The lender can sue the borrower for the outstanding balance and any repossession fees. If the lender wins the lawsuit, they can obtain a judgment against the borrower, which can lead to wage garnishment or seizure of assets.

Conclusion

Repossession is a difficult and stressful experience for car owners. It’s important for car owners to keep up with payments to avoid repossession and protect their credit score. If a car does get repoed, the owner should contact the lender immediately to arrange for payment and get their car back.

Additionally, buyers should be cautious when bidding on repossessed vehicles as they may have undisclosed issues. While lenders can take legal action against borrowers for the outstanding balance, borrowers can also seek legal advice to explore their options.