How to Fix Your Defaulted Car Loan

How to Fix Your Defaulted Car Loan
  • Opening Intro -

    As long as your car loan payments are up to date, you are in good standing with your lender.

    Once a new car loan goes unpaid for more than 30 days, then your loan enters default status.


A loan that is in default status can lead to a vehicle repossession within 90 to 120 days. You can fix your defaulted car loan by taking the following steps, avoiding the dreaded visit from the repo man.

1. Notify your lender. As soon as you fall behind on your monthly car loan payments, you should contact your lender. You should explain why you are late with a payment and discuss options to help bring your loan up to date. If you are experiencing a financial problem, your lender may agree to tack your unpaid payment(s) to the end of your loan.

2. Ask for a new loan. Your lender may agree to refinance your vehicle, especially if you have the means to make future payments. Perhaps your loan amount is very large resulting in high monthly payments. By extending your car loan out a year or two more, you may find that you can afford your payments. You can also talk with other lenders about refinancing with them.

3. Sell your car. If you cannot afford your monthly payments, consider selling our car. Keep in mind that the lender has a lien on this vehicle and will not allow you to transfer the vehicle without permission. The buyer may be required to pay off your loan or secure new financing with your lender. Don’t plan to hand over the keys to your car until your lender signs off on the deal.

4. Avoid repossession. Your lender can take your car back at any time per your loan agreement. Certainly, if your car is repossessed you may be able to buy it back, but you’ll be charged fees and will end up paying much more for the car once it has been taken back. Work out a deal with your lender before the repo man pays you a visit.

Loan Notes

Late payments will hurt your credit score. A vehicle repossession will cause your score to plunge and that information will stay on your credit reports for seven years. If your car is repossessed, you will be charged for the loan deficiency which is the difference between what the lender sold your car for and the amount left on your loan. Stay in contact with your lender until your problem is resolved. Obtain lender contact information including contact person, phone number and case number, if applicable.


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Categories: Consumer Financing

About Author

Matthew C. Keegan

Matt Keegan is a freelance writer and editor as well as publisher of "Matt's Musings", his personal blog. Matt covers campus, consumer, business and financial topics on various websites and blogs, and has been published in the "Houston Chronicle", "Sam's Club Magazine" and "Wisconsin Golfer".