Car Repossession in Canada: What You Need to Know Car repossession can be a distressing experience for borrowers, and there are two types of car repossessions namely involuntary or voluntary.
Types of Repossession
Involuntary Repossession is what the name implies, if you have not made payments and won’t cooperate with a “work-out” to make them then the bank or lender takes back their car. It generally starts with the borrower missing payments, and if no arrangements are made to settle debts owed then a bailiff may be sent out by lenders to reclaim money or open up possibilities for repossession. In the course of one missed payment, everything can usually get set in motion, digging a deep financial hole for borrowers who could end up facing lawsuits over any resulting deficiency after the car is auctioned off.
By contrast, voluntary repossession is when borrowers realize they can’t make the payments on their loan and so voluntarily give back their car. This can also offset some or all of the additional costs you incur from involuntary repossession (towing fees, storage fee etc)34 While they are both bad for credit, voluntary repossession might not damage your score as much.
Consequences of Repossession
No matter the type of repossession,the repossessing authorities come with a heavy hand, and yet you think they are working hard in your best interest as well.? In some cases, the repossession record can stay on a credit report for up to seven years… which may make it difficult in obtaining loans or other services down the line13. The borrower is also obligated to any deficiency balance if the sale of the vehicle does not pay-off this loan. This means that they could be on the hook to still pay back money with interest even after their vehicle is gone33.
Prevention Strategies
The key is to communicate with your lenders in advance so you can avoid a situation that would lead them into repossession. Borrowers dealing with financial difficulties are encouraged to contact the lender immediately to explore potential payment plans or loan modification options. Selling the vehicle can also be a valid alternative before it reaches repossession.car repossession (ad)14 There are also financial advisors or debt experts who can help guide advice to individual circumstances.
By understanding car repossession in Canada, or repossessions of any kinds and all you want to know about those types like the process, consequences, how it happens & what can we do that makes some borrowers feel more empowered while they make an effective decision and potentially saved from this difficult situation.
