Auto Deficiency is Bad Credit
Ok. You were late on your car payment. The bank did an auto repossession on your car.
Now you have bad credit. It’s over, right?
Nope. The bank or finance company will submit your account to your credit report as bad
debt. Then attempt to recover the past due amount from you. If after a period of time,
usually 90 days, they can not recover the past due amount from you, they will sell the
repossessed car at an auto auction leaving what is called an auto deficiency.
Let’s say, that at the time your car was repossessed, you owed $10,000.00 on the car note
and they sell the car at auction for say, $8000.00. Well, that $8000.00 goes towards the
outstanding balance of the $10,000.00 car note. This leaves a remainder of $2000.00 on the
car note.
Now you have bad credit. It’s over, right?
Nope. The bank or finance company will submit your account to your credit report as bad
debt. Then attempt to recover the past due amount from you. If after a period of time,
usually 90 days, they can not recover the past due amount from you, they will sell the
repossessed car at an auto auction leaving what is called an auto deficiency.
Let’s say, that at the time your car was repossessed, you owed $10,000.00 on the car note
and they sell the car at auction for say, $8000.00. Well, that $8000.00 goes towards the
outstanding balance of the $10,000.00 car note. This leaves a remainder of $2000.00 on the
car note.
The $2000.00 is referred to as the
“auto deficiency" amount. This
amount is what is left to be paid by
you. Along with any towing, storage,
and administrative costs incurred in
selling the car at auction.
“auto deficiency" amount. This
amount is what is left to be paid by
you. Along with any towing, storage,
and administrative costs incurred in
selling the car at auction.
If you fall behind on your car
payment, there are options to avoid
repossession. But you must act
quickly.
First, if you foresee an interruption in
income in the near future that will
affect your ability to make your car
payment, call the bank or finance
company well before the due date.
They may be able to defer a payment
payment, there are options to avoid
repossession. But you must act
quickly.
First, if you foresee an interruption in
income in the near future that will
affect your ability to make your car
payment, call the bank or finance
company well before the due date.
They may be able to defer a payment
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to the end of your car note, accepting payment of interest only. If they agree, get it in
writing.
Second, seek out a refinance option if one is available. This will not only push out your next
payment, but it may also reduce your future monthly payments. Again, it is important to ask
for this option prior to your payment being past due. If they agree, get it in writing.
Third, break up the payment. Offer to pay half on the 15th of the month and the remainder
by the 30th of the month. This may cost a late fee or maybe additional interest for this ‘one
payment’ but if it could get you out of a jam and could be well worth it.
Again, if they agree, get it in writing.
writing.
Second, seek out a refinance option if one is available. This will not only push out your next
payment, but it may also reduce your future monthly payments. Again, it is important to ask
for this option prior to your payment being past due. If they agree, get it in writing.
Third, break up the payment. Offer to pay half on the 15th of the month and the remainder
by the 30th of the month. This may cost a late fee or maybe additional interest for this ‘one
payment’ but if it could get you out of a jam and could be well worth it.
Again, if they agree, get it in writing.