 TITLE: How Does a Repossession Affect Your Credit? CONTENT: What Is an Auto Repossession?\n-----------------------------\nWhen you finance a car, your lender retains a security interest: They hold title to the car until the loan is paid off. Under the terms of your loan contract, your lender can take possession of your car if you fail to make your monthly payments as agreed and default on the loan. Your loan contract spells out exactly when default occurs but, practically speaking, most banks and credit unions won't start the repossession process until at least 60 days have elapsed since your payment was due.\nDifferent states have different laws regarding repossession. Check with your state attorney general's office to learn about the laws that apply in your area. Many states require lenders to notify you in advance if your vehicle is about to be repossessed. And many don't allow lenders to \"breach the peace\" when taking your vehicle: They can't damage property or use physical force. You are also entitled to any personal property left in the vehicle.\nThe lender has a right to keep or sell your car, but typically they'll sell it and apply the money they get to your outstanding loan balance. If your car does not sell for enough money to cover your debt and the cost of towing, storage and any other fees or expenses that have accrued, you will owe the difference—known as a deficiency balance. END