1. Sells the car. The lender will sell the car at a public auction or through a dealer. The proceeds from the sale will be used to pay off the loan balance and any associated fees and costs.
2. Sends the borrower a deficiency balance. If the sale proceeds do not cover the loan balance, the borrower will owe the lender the deficiency balance. The borrower may be able to negotiate a payment plan with the lender.
3. Reports the repossession to the credit bureaus. The lender will report the repossession to the credit bureaus, which will damage the borrower's credit score. The repossession will remain on the borrower's credit report for seven years.
4. Takes legal action. In some cases, the lender may take legal action against the borrower to collect the deficiency balance. The lender may garnish the borrower's wages, seize the borrower's assets, or even sue the borrower.
Repossession is a serious financial problem. It can damage the borrower's credit score, make it difficult to get approved for future loans, and lead to legal action. If you are facing repossession, you should contact the lender immediately to discuss your options.
