1. Default on Loan: You miss a pre-determined number of monthly loan payments as specified in your loan agreement. This is usually around 2-3 consecutive missed payments, but it can vary.
2. Notice of Default: The lender (typically a bank or credit union) sends you a notice of default. This informs you that you have failed to comply with the loan terms and that they intend to repossess the vehicle.
3. Repossession: If you do not pay off the arrears or make arrangements with the lender within the specified timeframe mentioned in the notice of default, the lender can repossess the car. They may send a repossession agent or hire a towing company to take possession of the vehicle.
4. Alternative Options: In some cases, before repossessing, the lender may reach out to you to offer alternatives, such as restructuring your loan or discussing a payment plan that fits your financial situation better.
5. Impoundment: The repossessed vehicle is usually taken to a secure location called a repossession lot or impoundment yard.
6. Sale of Vehicle: If you do not redeem or reinstate the vehicle within a specified period, typically around 10 to 30 days, the lender may sell it. This is known as a repossession sale. The proceeds from the sale go towards paying off the outstanding loan amount, repossession costs, and any other associated fees.
7. Deficiency Judgment: If the sale of the repossessed vehicle does not fully satisfy the outstanding loan balance, the lender may seek a deficiency judgment against you. This means they can take legal action to recover any remaining unpaid debt.
8. Impact on Credit: A repossession can have a significant negative impact on your credit score and credit history. It may make it more difficult for you to obtain credit in the future or may result in higher interest rates on loans.
To prevent repossession, it's important to meet your loan obligations and promptly communicate with your lender if you're facing financial difficulties that could affect your ability to make payments.
