What Are Car Loan Charge-Offs?
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How Does a Car Loan Charge-Off Work?
Charge-Off vs Repossession
Your credit score may plunge if you lose your vehicle to car repossession Voluntary repossession can also damage your credit It’s possible to reinstate your car loan after repossession Refinancing after repossession may be an option for some borrowers
How Does a Car Loan Charge-Off Impact My Credit Score?
You may finance a vehicle purchase with a bad credit score, but the lender may charge a high rate of interest Borrowers with bad credit may qualify for subprime auto loans You may refinance a car loan with bad credit
When Does a Lender Issue a Car Loan Charge-Off?
A borrower becomes 120 days past due on making a required car loan payment A lender determines that a borrower’s outstanding car loan debt is uncollectible A lender learns that a borrower’s outstanding car loan debt has been discharged in bankruptcy
What Happens if Your Car Loan Is Charged-Off?
A lender may record your charged-off car loan as a credit loss for accounting purposes A lender may sell your unpaid debt to a debt collector You may still owe outstanding principal, interest, and fees if the lender charges off your car loan without forgiving your debt A lender may report your charged-off car loan status to the credit bureaus, which can damage your credit score You may lose your vehicle to repossession Your lender may sue you for a deficiency judgment if the resale value of your repossessed vehicle is insufficient to cover the balance of what you owe
Avoiding a Car Loan Charge-Off
3 Auto Loan Tips
Refinancing your auto loan could lead to lower monthly car payments and more money in your budget. Lantern by SoFi can help you find the right auto loan refinance terms for you. Shortening the term of your auto loan may increase your monthly payments, but you’ll likely pay less in interest over the life of the loan. You may have trouble refinancing the loan on a car that is worth less than what you owe. For more info, check out When Is the Right Time to Refinance a Car?
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