The Road Out of Debt: Bankruptcy and Other Solutions to Your Financial Problems

Chapter 11. The Way Out of Auto Debt

Another way to solve the traffic problems of this country is to pass a law that only paid-for cars be allowed to use the highways.

—Will Rogers

If you have obtained a loan to buy or refinance your vehicle, you likely pledged the vehicle as security for the loan. In doing so, the lender earned the legal right to repossess, or take back, the car if you don't keep up with your payments. The lender can do this by hiring a reposessor to break into the vehicle and remove it from your control. Remember that automobile title loans, also known as title pawn loans, are at the center of many predatory scams. As we discussed in Chapter 5, falling prey to one of these scams never ends well. You will pay exorbitant interest rates of several hundred percent and risk losing your vehicle.

If you are behind in payments or in danger of getting behind, the first step is to know your rights and your lender's rights to your vehicle. To do this, read the document you signed at the time you entered into the loan. If you cannot find that document, contact the lender to get a copy. If the car is listed as security and your lender's name is located on the car title or registration, then the lender can repossess your car in the event of missed payments.

Your goal in handling your auto loan should be to avoid being at the mercy of your lender and the repossessors. Most people need a vehicle for everyday life—a way to get to work, school, health care appointments, children's ...