How To Avoid Repossession

Financial hardships can sometimes lead to your car being repossessed, but there are preventative measures you can take to avoid it.

How To Avoid Repossession

We’ve all been in that situation where life is going smoothly and before you know it you’re faced with something difficult like losing your job or facing medical bills. This can be made all the more unpleasant if you have unrelenting car payments.

Most lenders and dealers, however, offer "debt protection" plans which cancel your loan payments for up to 6 months, in the event of suffering job loss or hospitalization. Debt protection also includes a death benefit that pays the entire loan if the borrower dies so the surviving family can keep the car without having to make payments.

Unfortunately, if you can’t make your payments your car can be repossessed, you’ll get a blemish on your credit report and on top of that you’ll still have to pay the remaining balance. So what can you do when you’re staring at the business end of a repo? Fortunately, there are a number of things you can try.


One option is to refinance, meaning you can potentially lower your monthly payments. However, if your car is underwater, which is to say that you owe more money than the car is worth, you may not be so lucky as to convince your lender to grant you lower monthly payments.

Luckily you can apply for refinancing via lenders online, and the process takes all of a few minutes. Unfortunately, this option won’t work retroactively, and most lenders require the previous three payments to be on time, so be proactive with refinancing. If there’s a hint of doubt you won’t be able to make a payment, well in advance, contact your lender to find out your options.

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Cut back on expenses

A more long-term solution would be to take a good hard look at your monthly expenses. If you’re having trouble making your monthly car payments, maybe $300 sushi dinners aren’t necessarily the best course of action anymore.

There are several budgeting apps available that make handling money much easier and more convenient than ever before. Before you tackle something like refinancing, just try to see if there’s any way you can save a bit more money first.

Sell the car

If you can’t make payments and the car is not underwater, you can sell it to pay off the rest of the loan. KBB is a place you can go to research the value of your car, or at least get a decent idea. Sometimes lenders will charge you the total interest, regardless of whether or not you pay off the loan early, so make sure to take a look at your financing agreement.

Define new terms

The road less traveled, rather, what could be considered as an unorthodox route is to contact your lender and see if you can negotiate a contract change. If you are upfront and inform them of your situation, you may strike a sympathetic nerve and convince them to postpone a payment. This only works if you’ve been consistently making full and timely payments.

If this method is successful, you may be able to change your contract terms. If you decide to take this method be sure to do It as soon as possible because after a while your loan could be given to a debt collector and if that happens it’s too late. New terms might also include paying only interest for a short period of time, i.e. three months or so.

If repossession is something preying on your mind, just be sure to stay on a strict budget that guarantees you’ll have enough for your monthly payments. If you do that, then this kind of thing simply won’t happen.

Brian GrabianowskiBrian Grabianowski

Avid Formula 1 fan and motorcyclist, I enjoy chocolate chip cookie dough ice cream and long rides to the beach.