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Should you repossess a car you financed or took as collateral?

| Nov 13, 2020 | Banking & Business Transactions |

Vehicles can be an asset worth a lot of money, which means that people often include them in major banking transactions. A customer in need of a personal loan, for example, might use their vehicle as collateral for that loan. Someone who needs a car because theirs got damaged in a crash or just stopped working might need to finance a purchase if they don’t have enough money on hand to buy a vehicle outright.

When someone defaults on a loan, whether the vehicle was the item purchased or the collateral used for the loan, your financial institution may have to consider repossessing the vehicle.

Awarding the borrower is the most important step

People need cars to get around and to take care of their families. Losing a vehicle due to repossession can be financially devastating for an individual and their entire family. Receiving notice in the mail that your bank intends to repossess the vehicle if they don’t bring the loan up to date should be adequate incentive for someone to finally get in touch with your company.

Trying to work with the borrower can sometimes benefit your business

If someone has missed multiple payments on a loan, they probably don’t suddenly have enough liquid capital to make all of those missed payments at once.

Working with someone to slightly reduce their monthly payment or move past due amounts to the end of the repayment cycle are both ways that your financial institution can get someone to start paying again while also allowing them to keep their vehicle.

Make sure the repossession is worth the expense

Some people will go to drastic measures to prevent the repossession of their vehicle, such as parking it elsewhere and walking half a mile every day before they can drive. Skip tracing and repeat searches by repo drivers can quickly become expensive for your business.

It’s important to make sure that the value of the vehicle justifies the expense you incur trying to repossess it. In some cases, it may be a better approach to bring a civil lawsuit against the non-paying borrower to garnish your wages. Talking about the issue with an attorney who is experienced with financial transactions and loans can help you decide the best approach to take.