 TITLE: How Does a Repossession Affect Your Credit? CONTENT: How to Avoid Vehicle Repossession\n---------------------------------\nIt's far better to avoid repossession than to deal with its aftermath. The most important step you can take if you're worried about—or are in the midst of—a repossession is to communicate with your lender. As soon as you realize you're going to have trouble making your car payment, take a few proactive steps. Try to figure out why this is happening and how you might resolve your difficulties:\n*   Is this a one-time event or a recurring problem?\n*   Do you have the money to bring your loan current? Can you make the remaining payments on time?\n*   Would it help to skip a payment or two?\n*   Would it be better to restructure and get lower payments for the remainder of your loan?\n*   Should you consider ending your loan contract?\nThe sooner you call your lender, the better your chances of negotiating a deal that minimizes damage to your credit and your finances. A temporary cash flow issue might be resolved with a deferment, which allows you to skip one or two monthly payments without triggering a default or repossession. You'll still be on the hook for the money, but the payments—including interest—are added on to the end of your loan.\nIf your credit is still good and you can demonstrate the ability to make future payments, you may be able to negotiate a modified payment plan for the remainder of your loan. Any change to your original loan agreement—including a deferment or a new payment plan—should be documented in writing to avoid confusion over skipped or modified payments in the future.\nHere are few additional alternatives to consider:\n*   **Sell your car.** If you simply can't afford your car payments anymore, one option is to sell your car, preferably before late payments become a repeat issue. You may be able to raise enough money to pay off your loan entirely, and have money left over to put toward a new, less expensive car. Even if you don't get enough to cover your loan balance, you may recover more money than your lender would if your car was sold at auction, while also saving yourself the cost and trouble of a repossession.\n*   **Refinance your loan.** While your credit is good, you may be able to refinance your loan balance with another lender. Lower interest rates or a longer repayment term could help make the remainder of your loan more manageable.\n*   **Consider a voluntary surrender.** If giving up your car is unavoidable, you may want to voluntarily give your car over to the lender. A voluntary surrender still shows up on your credit report, with nearly the negative impact of an involuntary repossession, but it may allow you to salvage your pride and a bit of good grace from your lender. You may also save a few dollars by not requiring the services of a tow truck. END