A Car Loan Default does not only hurt your credit score, it also put a serious black mark on your financial status. There are certain measures, creditors take if you are failed to pay your payments on time. Some creditors immediately repossess you auto even if you miss one payment, while there are some who wait for some time and then repossess your car, if your due payments reach to three or four.

It is thus very much important that you should read the terms and all other documents before getting into a car loan agreement.


There are certain potential consequences of a car loan default that you should be aware of.


Car Repossession is a very common step taken by the creditor if you get into a car loan default. Some lenders seize the car without even giving you any advance notice.

Breach of Peace

In case your creditor commit a breach of peace when repossessing your car after your car loan default, then you can take your creditor to the court of compensation. This is normally done, when your creditor give you some harm in terms of physical injury or financial harm. You can even sue him for the difference between the amount you owe and the amount at which your creditor sells your car.


Usually, after your car loan default and the repossession, the creditor resells the car. Well this law varies place to place. Generally, the resell practice is done in public auction or a private sale. If in Public Auction, you can join, and bid to get your car back.

Debt Redemption

You can redeem your debt to save your car from reselling, but in that case, you will have to pay the total amount, along with the amount that was left on the debt when you went into your auto loan default. At times, you are liable to pay total cost like storage and the attorney fees, that is associated with the creditor having to repossess the car.

Reinstate the Loan

Some states allow you to reinstate your loan and then start over. you are just asked to pay the amount plus all the fees associated with the repossession, and you get your car back, while the remaining original loan payments, you keep on paying. However, then in future, you will have to be more alert in terms of your loan payments to avoid another loan default.

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Rana Mansoor Akbar Khan

Rana Mansoor Akbar Khan

Financial Blogger. Tech Journalist. Freelance web developer.

1 Comment

  1. December 4, 2011 at 12:45 pm

    These are very difficult economic times. It’s easy for a struggling family, especially a single mother, to fall behind on car payments.

    In many instances, the vehicle is essential to maintain a job, transport kids to day care provider, and even get to doctor appointments. A repossession can devastate an already struggling household.

    Thanks for a very informative article.