![]() This allows the original lender to take ownership of the vehicle if the borrower doesn't pay. Most auto loans are secured loans, meaning they're backed by the vehicle itself. Repossession occurs when the original creditor takes possession of the vehicle. If you continue skipping payments, the lender or credit agency might pursue repossession efforts and take the vehicle from you. This can make it difficult to qualify for additional loans. You can also expect the unpaid debt to go on your credit report. The lender might send the debt to a collections agency. What Happens after a Loan Charge-Off?Ī loan charge-off doesn't mean you no longer owe the debt. If the lender doesn't repossess the vehicle, they might list the charge-off as the vehicle's estimated value. The charge-off amount is the value the lender invests in the vehicle, which might also include security interest, collections efforts, and profits earned if they can sell the vehicle. The amount the lender charges off might not match the debt the buyer owes on the loan. This charge-off timeline might be longer for other debt types, such as credit cards. ![]() ![]() Federal rules encourage lenders to notify the government of uncollectible debt as soon as they verify nonpayment. However, the lender can charge off an auto loan earlier. It typically requires lenders to charge off an auto loan within a maximum of 180 days. The federal government regulates charge-offs. The lender deems the loan uncollectible and charges off the loan. When a borrower stops paying, the auto loan is no longer an asset but a liability. Lenders initially consider auto loans to be assets because they anticipate the borrower will make their payments and provide income. ![]() Charged-off debt can include car loans, credit card debt, or any other type of loan. Lenders most commonly charge off car debt for tax purposes. ![]()
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