Redeem Your Repossessed Car

When your car is repossessed, you have only a few options for getting it back. One way is to “redeem” the car. This means that you pay the entire balance of the loan, in addition to any fees or charges. In order to redeem your repossessed car, you need to come up with the money quickly and get it to the lender before it sells the car at auction.

Steps

Raising the Money

1. Find your deadline. After the lender repossesses the car, it should send you some notices in the mail. One notice should inform you of how you can redeem your car. The notice should also tell you the deadline for redeeming the car and the redemption amount. If you don’t receive this notice within five days of repossession, then contact the lender.
   • You must get the full amount in order to redeem the car. Redemption is not “reinstatement.” When you reinstate a loan, you pay any missed monthly payments. The loan then continues on as usual. With redemption, you must pay the entire balance of the loan.
   • Note the deadline and commit to getting the full amount before then. You have no right to reinstatement, so redemption might be your only way of getting the car back.
2. Try to negotiate. It can’t hurt to call up the lender and ask if you could redeem the car for less than the price the lender is asking. The lender will have to sell your car at auction, and there is always a chance that the only buyer will make a low offer. The lender could lose money on the sale.
   • The lender might be asking for $7,500, but you might only be able to gather together $6,000. If so, you should call and explain your situation.
3. Ask friends or family for a loan. You probably don’t have the money to redeem your vehicle. If you did, you wouldn’t have missed your monthly payments in the first place. Accordingly, you need to try and get a loan for the full redemption amount. Your friends and family might be able to forward you some money.
   • Try to get a loan interest-free or low interest. For example, if the redemption price is $10,000, then your monthly payments on a five-year loan will be about $175 a month with a two percent interest rate. However, if your interest rate is eight percent, then you would end up paying almost $200 a month.
   • Talk to your family and friends. They might be willing to loan you the money for a low interest rate (or without charging interest at all). If they agree to loan you money, then you should draft a loan document.
4. Search for other low-interest loans. If your friends or family won’t loan to you, then you should seek a low-interest loan from other sources. Look into loans from local credit unions.
   • Before taking out any loan, make sure that you can make the monthly payments. There is no reason to take out another loan if you will only default on repayments in the future.
   • To calculate your monthly car payment, you can use one of the many calculators on the Internet. Plug in the amount of the loan, the length of the loan, and the interest rate. You will then get a monthly payment amount.
5. Notify the lender of your intent to redeem. You should promptly notify the lender of your intent to redeem the car. Your right to redeem will end once the car is sold, so you need to reach out to the lender quickly.
   • Typically, lenders hold onto cars for only 10-15 days before selling them at auction. You shouldn’t take too much time.
   • The notice you receive might tell you how to notify the creditor. For example, you might need to send a letter certified mail. Always follow the method stated in the notice.

Redeeming the Car

1. Get a certified or cashier’s check. You might need to pay the lender using a certified check or a cashier’s check. These are more secure forms of payment than a personal check. You can get them at a bank.
   • With a certified check, a bank officer certifies that you had enough money in your account to cover the check on the date the officer certified it.
   • With a cashier’s check, the funds are moved from your account to the bank’s own escrow account. The check is then drawn on the bank’s account.
2. Take the check to the lender. You should contact the lender and find out where to take your check. Also ask who you should meet with and the specific process for redeeming the vehicle.
   • Try to redeem the car a few days before the auction date. Once the car is sold, it’s gone. You don’t want to wait until the morning of the auction only to miss a bus, have your car break down, or get sick.
3. Fill out paper work. You may need to complete some paperwork in order to redeem the car. The lender should let you know. Try to get a copy of any form you fill out.
   • Also get a receipt for the money you are handing over. This receipt will serve as proof that you have legally redeemed the car.
   • You may also have to go to the police department and get a “redemption release,” which costs a small fee. You then must take this lease to the repossession agency.
4. Get the keys. Once you have paid and completed all paperwork, you should be able to go to the agency that repossessed your car and get the car back. Show them the paperwork that you got from the lender and the police.

Negotiating a Reinstatement Instead

1. Find out how delinquent you are. Go through your paperwork and check to see how much you owe in unpaid monthly payments. You might be able to get the lender to agree to let you keep the car and reinstate the original loan if you cure any default.
   • For example, if you missed three rent payments before the lender repossessed your car, and each payment was $300, then you would need to pay $900 to get the original loan reinstated. You might also owe late charges and interest.
   • Once the loan is reinstated, you would then make a monthly rent payment. Reinstatement is usually more feasible than redemption because you can pay the loan off a little at a time each month.
2. Come up with the money. You will need to pay off all owed car payments. Accordingly, you need to come up with the money—and quickly. Make sure that you have the money in hand before calling the lender to ask for reinstatement.
   • Pool all available money that you have. Think about selling possessions you need less than the car. For example, you could sell exercise equipment, electronic equipment, or musical instruments. You can take them to a pawn shop or advertise on Craigslist.
   • You also could get an unsecured personal loan from a bank or credit union. You will need to have a good credit score in order to get a personal loan with a low interest rate. This might be difficult if the repossession has already been reported on your credit report.
   • You also might be able to get a short-term loan from family and friends. Although they might not have been willing to loan you a huge amount to redeem the car, they might be more willing to offer a smaller loan to help you get the loan reinstated.
3. Call the lender. You should call the phone number on the notice your lender sent. Because time is of the essence, you shouldn’t delay. Instead, call the lender and ask if you can reinstate the loan instead of redeeming the car.
   • Be honest about your past financial difficulties, but explain why you are in a better position to make payments again. If you can convince the lender that your financial difficulties were temporary, you will be more successful negotiating.
   • Offer to show the lender proof of your improved financial position. For example, you might have recently gotten a job. Offer to show the lender your employment letter.
4. Pay off your overdue car payments. If the lender agrees to reinstate the loan, then coordinate how you can pay off your overdue car payments. Also ask how you can pick up your car.

Tips

• If you think you might fall behind on your car payments, you should call the lender immediately. Don’t wait for the car to be repossessed before trying to negotiate with the lender. Once the car is repossessed, the lender is in the driver’s seat and can sell the car quickly, usually after only a couple of weeks.
• Always avoid payday lenders. These businesses charge sky-high interest rates, often more than 300% annually.

References

See also

• Apply for a Used Car Loan
• Transfer a Car Lease
• Get Your Ex Off a Car Loan
• Get a Car Loan While in the Military
• Compare Car Loan Rates
• Buy a Car with Bad Credit
• Find Alternative Finances for Your Auto Loan
• Finance a Car
• Negotiate an Interest Rate on a Lease Buy Out Car Loan
• Make your New Car Tax Deductible using a Home Equity Loan

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