It’s much better to sell your car and pay it off than have it repossessed. Once your vehicle is repossessed for nonpayment, the activity stays on your credit report for seven years. A poor credit rating can affect your ability to get a future loan and could lead to less attractive interest rates when you do apply for credit.
Pay It Off
If the lender that repossessed your car sells it, you still may be liable for a balance on your original loan. If the car is not sold, you are liable for the entire balance. Creditors look favorably on people who make the effort to pay off old debts. To begin the repair process after repossession, the most effective step you can take is to pay off the balance.
Watch your finances diligently while you work to repair your credit. Develop a budget so that you won’t find yourself in a similar situation in the future. Pay your bills on time to build a history of on-time payments. Find a reputable credit counseling agency to help if you’re having trouble managing your income and expenses. Apply for a debt management plan if necessary. If you get in a crunch again, call creditors to work out a payment arrangement instead of going into default.
Linda Ray is an award-winning journalist with more than 20 years reporting experience. She's covered business for newspapers and magazines, including the "Greenville News," "Success Magazine" and "American City Business Journals." Ray holds a journalism degree and teaches writing, career development and an FDIC course called "Money Smart."