A Comprehensive Guide to Car Loan Debt Relief
Dealing with the financial stress of car loan debt can be daunting. Especially when the vehicle is essential for your work or family needs. Given the high cost of vehicles and their maintenance, it often takes years to pay off a car loan fully. This article offers a detailed look into car loan debt relief and how you can ensure to keep your vehicle amidst financial difficulties.
Understanding Car Loan Debt
Cars, by and large, are costly to maintain. Coupled with the car loan, there are usually interest payments to deal with. Life can be unpredictable, and sudden changes such as job loss, unexpected medical bills, or a divorce can make these payments unaffordable.
Another way car loan debt can pile up is when the amount you owe for your car exceeds its actual value. This often happens when the value of brand new or luxury vehicles depreciates over time. However, even in these situations, it’s possible to obtain car loan debt relief.
How to Prevent Car Loan Debt
If you’re concerned about car loan debt spiraling out of control, the first step is to get your car valued. Factors like the make, model, mileage, and features of your car affect its value. Once you have a vehicle valuation, calculate your potential loan payments, including any interest. Then, compare the loan affordability against your income.
If your calculations indicate that the loan payments are unaffordable or worth more than the vehicle itself, it’s time to seek car loan debt relief. You can book a free consultation with experienced Licensed Insolvency Trustees for advice.
Vehicle Repossession: What Is It?
Repossession can occur with both a car loan or a vehicle lease. If you fail to stay current on your payments, the lender may seize the vehicle. For purchased vehicles, the lender may register a lien against your car to guarantee payment. If these car loan payments aren’t met, your vehicle may be reclaimed in an involuntary repossession.
It’s important to note that repossession doesn’t absolve you of your responsibility to repay the car loan or lease agreement. After the seizure, the car is sold or auctioned, and the sale total is deducted from your remaining balance. Late payment fees and repossession costs are added to your outstanding debt, which then becomes an unsecured debt.
Steps to Take After Vehicle Repossession
If your car has been repossessed, or you feel overwhelmed by your car loan debt, there are car loan debt relief options for you. The best course of action is to contact a Licensed Insolvency Trustee to discuss your financial circumstances.
Filing a Consumer Proposal for Car Loan Debt Relief: Car loan debts are a common cause of insolvencies in Canada. A consumer proposal is a legal form of debt settlement, where a Licensed Insolvency Trustee negotiates with your creditors on your behalf to reduce your debts by up to 80%.
Filing Bankruptcy for Car Loan Debt Relief: While it should be the last resort, filing bankruptcy can be a suitable option if you’re struggling with other overwhelming debts like credit card or tax debt. Bankruptcy involves reassigning your non-exempt assets to a Licensed Insolvency Trustee who uses them to repay your debts for clearance of any remaining debt from your creditors.
How to Evade Car Repossession
The best way to avoid car repossession is by making your contracted car payments to your lender on time. Negotiating a new payment plan would likely mean you still need to catch up on arrears and pay any recovery fees. Even filing bankruptcy cannot stop a repossession, as bankruptcy covers unsecured debts (not secured debts, which are those tied to an asset).
Escaping Car Loan Debt: What Are Your Options?
There are always options for getting car loan debt relief. Here are some of the most common ones:
Selling the Car: If you can sell the car, you may be able to transfer the vehicle contract and loan to another person.
Voluntary Vehicle Repossession: If you’re worried you may default on your payments, it’s best to contact your creditor to initiate voluntary repossession.
Negotiating a New Car Loan Payment Plan: Often, arranging a solution that works for both parties avoids the hassle of other options, such as repossession or lawsuits.
Remember, dealing with car loan debt can be stressful, but it’s not impossible to manage. Seek professional advice and explore the available options for car loan debt relief to navigate through the process smoothly.
