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Think Twice Before Resorting to Repossession
The MMI Online Articles are designed to inform, assist, educate and alert consumers.
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Owning a vehicle is no longer considered a luxury, even though the cost of transportation can be excessive for many middle-class Americans’ budgets. Car and lease payments, insurance, gasoline, repairs and maintenance costs can really add up. In fact, these costs can consume up to 20 percent of the driver’s take-home pay. As a result, many consumers are forced to consider “voluntary repossession” in order to lessen their monthly financial burden. If you are struggling to make your loan or lease payment, there are a few facts you should know before considering a voluntary repossession.
Telemarketing fraud caused losses of more than $1.7 million in 2003. Total Internet fraud losses equal more than eight times that figure. Obviously, you should steer clear of get-rich-quick schemes and suspicious “contests.” Unfortunately, thieves adapt as consumers become educated; fraud has seeped its way into more trustworthy covers including “charities,” credit repair, loans, travel, online auctions and work-from-home offers. Following are some ways to foil fraud:
- A repossession is a repossession- voluntary or not. Both a voluntary and an involuntary repossession affect your credit in the same way. The only difference is that if you voluntarily return your vehicle, you could save on some fees associated with its collection. Either way, the derogatory notation will remain on your credit bureau file for seven years.
- Your obligations may not end after the vehicle is repossessed. Once a vehicle is repossessed, the lender will most likely sell it to the highest bidder and apply the proceeds of the sale to the balance owed on the car. If the sale price is not sufficient to pay the balance due and any legal fees incurred, there will be a "deficiency balance" remaining. You and any co-signer will be legally obligated to pay this deficiency balance. If you do not pay this balance, the creditor can possibly sue you to try and collect.
- Preventing a repossession is easier than disputing it afterward. If you are unable to make a timely payment, contact your creditor or lessor immediately. Many creditors or lessors have programs in place to help people experiencing temporary setbacks. If you are able to negotiate a revised schedule of payments with your creditor, do not forget to get these terms in writing to avoid any possible miscommunication.
- Co-signers are equally responsible. If you have a co-borrower, and your vehicle goes back as repossession, not only will the repossession appear on the co-signer’s credit report, but they are also legally responsible for any deficiency balance.
-Remember your budget. Even if a solicitation proves to be legitimate, ask yourself if it is really something you want. Remember, before they called you probably didn’t know you “needed” what they’re selling.
-Head them off at the pass. Ask telemarketers to put you on their “do not call” list. Under federal law, they are required to comply. If they continue to call you can sue them in small claims court for $500. For information on how to stop unsolicited email spam, review your state’s laws at www.spamlaws.com.
Since the cost of having a vehicle repossessed is quite high, it makes sense to exhaust all options before allowing repossession to occur. Many creditors have hardship programs in place to help people experiencing temporary set-backs. For example, your lender may grant an extension, meaning that the past due amount can be paid at the end of your loan. Another option may be for the lender to rewrite your loan to reduce your monthly payments.
Some other alternatives to repossession might be to sell the vehicle, to find someone to “assume” your lease, or to take out a different type of loan (i.e. home equity loan) to satisfy the debt. For more information about your rights and responsibilities, visit www.ftc.gov.
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