Have you ever considered how best to pay off debt after a car repossession? Imagine yourself in this situation ; you sign up for a car loan and get an approval. Then you start making payments consistently for months. However, due to financial troubles you skip a few payments. After sometime the loan servicer repossesses your car with fear that you will never be able to pay back. Am sure you will feel very bad. Your sadness is not only for the car taken from you, it’s also about all the debt you still have to pay. What can you do?
How Best To Pay Off Debt After a Car Repossession ; Deficiency Balance
After a vehicle undergoes a repossession, the borrower will still be on the hook for any amount he owes that was not covered by the sale of the car. For instance, if you still owe $5,000 on your vehicle and the lender only manages to fetch $4,000 for it at auction, you will pay a deficiency balance of $1,000.
Additionally, you will still pay the cost of the repossession, the storage of the vehicle while it was waiting to be sold, and the costs of selling the vehicle. Too bad.
How Best To Pay Off Debt After a Car Repossession ; Obligated Pay After Auto Repossession
If you can, pay the deficiency amount in full especially if it is small. But if your financial circumstances do not permit that, reach an agreement with the lender. The two parties can draft out a plan on how you will repay. But if you show a proof that things are not really well with you, the lender may agree to settle for a percentage of what you owe them. If he agrees, you will pay immediately.
After the repossession you can wait, there is usually a delay period before the lender sends out a collection notice for the deficiency amount. However, in a situation that you completely cannot pay what you owe, as a last resort, declare bankruptcy. This will hurt your credit for some years probably 7 years. It may not save all of your financial troubles, but it will give you the tranquility that comes from not having that debt again.
How Best To Pay Off
Based on your financial capacity, set up a payment plan and pay as much as you can monthly. You can sell things you have but don’t need. Let your friends help you or lend you money. An additional source of income will greatly help you. All the above will not quickly correct the damage done to your credit score but it is better than declaring bankruptcy. It will take you only a few months to correct.