Car repossession can be huge worth when you are building your credit score. Among those troubles, one of the most hilarious is losing your car.
While the car is an important vehicle for your everyday life and you must have bought your dream car by spending lots of money, the financing company will take it back due to lack of repayment.
Some people think by repositioning the car, they can get back their lost credit score. Well, this thinking is not completely true. Rather such activity can also negatively affect and ruin the credit score. Apart from that, you will not be able to travel with ease anymore.
So, before opting for such repossession, let us know everything about this concept. Only after that is it better to think about repossession.
Definition of Repossession
Borrowing money as a car loan is supposed to be a repossession. While sanctioning the loan, the financial intermediary always mentions about repossession clause. A concept or act by which a lender used to take over the charge of a vehicle or any other thing financed by borrowing loan is called repossession.
Undoubtedly, this is a very sorrowful action, and as a result of it, the car owner lost the vehicle. Repossession occurs when the car loan borrower is unable to repay the outstanding amount for a long time.
If the borrower missed more than 5 installments without even any warning or issuing notice from the court, a financial intermediary could take over the charge.
However, whether the financing authority will issue a notice before repossession completely depends upon the country’s law. In Ireland, generally, every financing body must share a legal notice of hypothecation with the borrower. Apart from legal notice, the repossession is also supposed to be the contract period.
Only one condition can save a borrower from repossession of a vehicle, i.e., bankruptcy. If a person does not have any money left in his bank account or suffers from a freezing balance, he can easily get rid of repossession. Even if the lender wants to repossess your car, it is hardly possible because the court will impose a stay order on that notice.
Different Repossession Type
When it comes to the matter of car repossession, you must know that there are two different types of it. Such as voluntary and involuntary repossession.
When the borrower gives back the car with his wish as he cannot make the monthly payment, it is known as voluntary repossession. This is very rare where the borrower himself agrees to give back the car. But when a lender gets the vehicle, then he can relieve the borrower from repayment.
If you think whether such activity will improve your credit score or not then, we must say it depends on your lender. This is because you might have borrowed from taking bad credit car finance from a direct lender in Ireland a year ago. Now, after paying for half of the year, if you cannot repay more than 4 installments, he can only agree to show that there is no outstanding debt.
Moreover, when the borrower also allows the car to be repossessed by the lender, he agrees to repay the entire outstanding on behalf of the borrower. Only in such a condition is there the chance of repairing the credit score.
Due to spontaneous failure of repayment, when a lender takes over the charge of the property from the borrower, then it is known as involuntary repossession. However, in the contract, generally, a lender used to mention the repossession clause. As a result, he wants the borrower to be ready for such a scenario if he fails multiple installments.
No lender repossesses the without serving any notice. Rather, in most cases, a lender used to give multiple reminders to the borrower for failing installments. So, the instances of hypothecation without any notice are very rare. Apart from payment failure, the clause of breaching the contract can become the cause of involuntary repossession. The breach of contract includes,
- Threatening the lender of even showing physical strength even after failing repayment.
- You are creating a problem for neighbors by parking the car at the wrong place.
- I am keeping the car in front of a public garage.
- Lack of cooperation even after failing to repay the monthly installments and moreover, disobeying the clause of hypothecation mentioned within the contract.
Sometimes a lender may also perform such activities, which can cause a breach of contract. If a lender breaches the contract, then during repossession, you may also claim for damage control charges. However, you must remember that even if you allow repossessing the car, you will still not get relief from paying the loan amount.
So, even after giving the car, you may require to repay the monthly installments. Therefore, repossessing your car when the lender starts auctioning it to recover the cost of lending may happen that he is unable to get the exact amount he lent. In such a scenario, being a borrower, you have to compensate the rest of the amount.
Effect of repossession on your credit score
There is no doubt that car repossession is not at all a very good action against the borrower. So, if you think that you will become able to repair the credit score by opting for voluntary repossession, you are completely wrong. Act of repossession will come under the count of repayment history.
Although you can hardly understand the impact of repossession on your credit score, you will not be able to get it easily while borrowing a new loan. As a result, the credit score will not increase. Rather, it will decrease than the previous one. So, even if you need to borrow another online cash loan in Ireland, then take it and repay the entire outstanding in one shot.
Only after then can you save the car from repossession as well as maintain a credit score.
Car Repossession is an action of taking charge of the car for which a lender lent money to the borrower. This blog will tell you whether it is worthy enough to build a credit score.