How Long do Repossessions Remain on my Credit Report?
Having a vehicle repossessed can be financially
devastating. You lose your mode of transportation and you usually end up
owing thousands of dollars even after the car is sold at auction. Any
remaining loan balance plus repossession fees, storage fees, attorney
fees and auction charges are all still owed. To make matters worse, your
credit is severely damaged.
Your credit report will show the repossession as well as
your late payments. This information about your repossession will remain
on your credit report for 7 years. Getting approved for a subsequent
loan will not be a pleasant experience.
Car dealers sometimes advertise that they can get you
approved on a new car loan, even if you have had a repossession. This
may sound tempting, but consider the cost. Your interest rate will
likely be around 25%. What this means is you will end up paying for 2
cars but will only receive one. That $15,000 car will cost you a total
of $31,892.66. What the dealer will tell you is that he can stretch your
loan out 7 years so that your monthly payment is only $379.67. If you
agree to this, you will end up upside down on a car loan where you owe
far more than the car is worth. This would pretty much limit your
options if you wanted to sell or trade that car in.
If you need to purchase another vehicle, your best
option will be to pay cash. Look for a reliable used car that should get
you through the short term while you try to rebuild your credit. It
simply is not worth the expense of getting a high-interest loan. If you
do get a loan, know what the loan will cost you. The dealer will try to
seduce you with a lower monthly payment. Focus on the total of all the
payments, the total interest you will pay and the number of years you
will have to pay it.
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