Much like the ongoing crisis with home loans, vehicle loans have been causing consumers significant financial stress in the long term. Job loss or a change in wages, for instance, can make a once-manageable monthly commitment difficult to meet.

Damage to your credit score can be a slippery slope- late or missed
payments are often reported to credit agencies, in turn dropping credit scores and causing interest rates to rise. The new, higher payments are even harder for an already stressed borrower keep up with, exacerbating the problem.

Monthly car payments are not only one of the largest payments consumers owe monthly, but they also tend to be longer-term commitments. Coupled with the fact that many car loans are “upside down” (meaning the value of the loan far exceeds that of the vehicle’s current selling price), car loans are one of the least flexible monthly obligations for many consumers- and they’re nearly impossible to trade-in or sell.

Repossession is a common occurrence when car payments become financially overwhelming. However, repossession in the absence of other financial difficulty is rare, making obtaining a replacement vehicle a Sisyphean task. Aside from leaving you without transportation to work or school, repossession also stays on your credit score for seven years.
Whether the repossession is voluntary or involuntary is nearly irrelevant on the impact repossession has on your credit score.

In addition, lenders will almost always pursue a defaulting borrower for the balance of the loan. Repossessed vehicles sell for a fraction of their actual value at auction, which is in turn generally a fraction of the balance of the loan- leaving those whose vehicles have been repossessed in additional thousands of dollars of debt. Borrowers who have dealt with a repossession will not only owe a large sum to cover the loan balance, but also face astronomical interest rates when they try to buy another car.

One option borrowers often don’t know about is vehicle loan modification, and in the current financial climate, the option to avoid repossession by modifying an existing loan could prevent severe credit score damage for many struggling borrowers. Vehicle loan modification experts can do one of many things to free you from the crushing burden of an unbearable monthly loan payment or an impending repossession.

Conclusion

A vehicle loan modification expert will communicate with your lender for you, saving you the hassle of negotiating with a lender’s collections department. The vehicle loan modification expert may get the lender to change the terms of the loan, creating lower monthly payments you can afford. Or, they might obtain a short sale certificate so you can sell or trade the vehicle for its current value, negative equity notwithstanding. If a vehicle has already been repossessed, a vehicle loan modification expert can even reinstate a charged off loan.

Without a doubt, vehicle loan modification is the best option available if you fear repossession of your vehicle and the resultant credit damage. Have you used this process to avoid repossession of your vehicle? Did it make monthly payments more manageable in the long-term?