Your car is getting repossessed – What do you do?

You bought a brand-new car, and managed to consistently pay the amortization for a time. However, you've fallen on hard times due to a number of reasons: your salary has been delayed, you've been laid off,  or you've made unsound financial decisions that have eaten away at your income and savings. And after missing a payment or two, the bank has decided to haul your beloved car away.

This is a difficult experience, not only because you’ll have to take public transportation, but there's also the stigma of being known as someone who couldn't handle financial obligations. Repossession is the consequence of failing to pay your car loan after all, and to help you deal with it, Philkotse.com has compiled 6 things you can do after your car gets taken back by the bank.

"Oh, crap! All those time I've driven made me forget how to use public transport."

1. Find out the reason why

When a car is purchased through a car loan, the bank technically owns the car until you’ve completely paid off the loan. And when you default on your car loan, the bank will naturally have the prerogative to take it back and cut their losses. To default on your payment means a failure to meet the conditions and/or legal obligations of a loan, notably by missing one or more scheduled payments.

There are rare instances, however, where banks repossess cars by mistake. It could be due to errors with the bank’s records, or the towing company contracted to repossess an asset made a mistake. Another reason is the infamous “assume balance” scam; this happens when someone buys a secondhand car whose mortgage is still being paid for, so the buyer agrees to continue paying for the balance that the seller owes the bank.

The problem is when the previous owner had already ceased paying the monthly amortization, the car is already bound to be repossessed - all without the buyer's knowledge. The only thing thast can be done at this point is to file a criminal complaint against the seller for fraud.

>>> Also read: How to get approved for a car loan in the Philippines?

2. Recover your possessions stored inside the car

Even after the bank has hauled off the car to storage, you can still recover the items you've stored inside, whether it's your tools, your CDs, or other personal effects. There's no reason for the bank to refuse, since they only have jurisdiction over the actual asset in question (the car).

You'll need to talk to the bank as to how you can pick up your stuff. If there’s anything missing or damaged, you can report that to the bank as well.  

3. Ask if you can get your car back

Repossession is not a permanent state, at least not if you can commit to the bank that you will resume payment of the monthly amortization. So yes, it is possible for you to have the car back, but it won’t be easy.

You'll need to take a look at your finances, and consider options such as taking out other loans or bowworing money from friends and family to make up for whatever shortfalls you might find. You'll also need to consider the actual cost of ownership, aside from your living expenses.

Auctions are tricky as you do have some competition. If you don't come prepared, prepare to leave disappointed.

4. Possible ways you can get your car back

Buying the repossessed car

If you somehow managed to earn enough money by the time the bank has put up the car for auction, they might allow you to bid on it. As we’ve said, you'll need to be more circumspect about your own finances. Can you afford to own the car again? Will your bid on the car effectively reduce your finances to zero? Will you be able to live comfortably with the car back?

>>> Related post: Repossessed cars for sale in the Philippines: All you need to know

Here's a repossessed car auction in the Philippines.

Redeem the repossessed car

The period before the bank puts the repossessed car up for auction is your chance to actually redeem the car; just pay the remaining loan balance plus repossession fees. Also, some banks will inform you when they’ll be putting the car up for auction and how you can redeem your vehicle.

Reinstate or restructure your loan

If you act fast enough, and still have a stable source of income, then you can opt for the bank to reinstate your loan. However, note that the reinstated loan will follow new terms that will likely be in the bank’s favor, such as a higher monthly amortization or higher interest rates.

These type of guys might come with a smile, but read the fine print before you sign anything.

5. Do I cancel my car insurance or do I keep it?

It depends on the kind of car insurance and if you plan on getting the car back, so let's assume that that you do. If it’s a comprehensive car insurance package and you have the money to redeem or buy the repossessed vehicle outright, you'll want to keep it active. It may even help pay for the damage incurred by your car when it was hauled away from your premises.

As for comprehensive third-party liability (CTPL), this is non-negotiable since it is mandated by law; any car in your possession, whether fully paid for or not, needs to have liability insurance as part of its registration.

• 6 FAQs about Compulsory third-party liability insurance
• Is it worth buying Compulsory Third Party Liability insurance?
• Car smart: 19 car insurance terms that you definitely need to know

Will I save money or do I end up spending more by paying insurance for a car I don't have? 

6. Give up and just let them take the damn car

As we’ve said countless times in this article, trying to reacquire your repossessed car can drain not only your finances but your energy as well; from trying to buy your repossessed car, bidding on it, trying to get a restructured loan for it or paying it off to redeem it, all of these will significantly be more straining on your wallet in comparison to your first car loan.

Letting go of a car will tear you apart but sometimes, it's the right financial decision.

As such, it might be time to drop it, lick your financial wounds, and save up to purchase a second hand car instead. You might want to pay for your next purchase in cash, as your credit rating likely has taken a nosedive due to the repossession of your last car, and future creditors won't be too willing to let you borrow money for the time being.

Getting insurance for your next car purchase might likewise entail a higher premium, as the repossession of your previous car paints you as an added risk for insurers.

>>> Get more helpful tips for car owners