Got Your Car Repossessed? Here’s What You Must Do
Uh-oh, the bank just hauled your car away. What now?
Losing your car is painful as it is. The hard-earned money you’ve paid for the monthly installments is gone in an instant. Having no car suddenly can also jeopardize your work or business. It doesn’t help that the miserable state of public transportation in the Philippines doesn’t offer an alternative to car-less Pinoys.
What happens next could be very stressful, but it’s the ugly consequence of failing to repay your car loan on time. Here’s what you need to know about car repossession in the Philippines and the steps you can take after going through the experience of having a repossessed car.
Table of Contents
- What is Car Repossession?
- Car Repossession Process in the Philippines
- What to Do When Your Car is Repossessed
- Tips to Avoid Car Repossession
- Final Thoughts
What is Car Repossession?
In the Philippines, car repossession means your bank takes your vehicle because of missed payments, typically called loan default. Authorities can seize your vehicle as soon as you fail to make your car payments as agreed in the contract. Should you default, your bank can charge you the following:
- Extrajudicial Foreclosure Under the Chattel Mortgage Law (Act No. 1508): if you voluntarily surrender your vehicle.
- Judicial Foreclosure of the Chattel Mortgage: should you refuse to surrender your car. Your bank may file for a Replevin Case. The court will then issue an order, allowing authorities to repossess the car under any circumstance.
Car Repossession Process in the Philippines
Your bank can’t immediately take away your vehicle. Car repossession has a process and according to the law, your bank should do the following first:
- Your bank should give you notice that your car is about to be repossessed. You will then be given 21 days to act on it.
- After 14 days, your bank will send you another notice. You can pay your missed payments, return your car, or allow the bank to proceed with repossessing your car.
- If you didn’t make the payment, your bank will continue repossessing your car.
- You will get another notice and you can take back your repossessed car if you pay all your debts. You can also find another person who will purchase your vehicle.
- If you didn’t take any action, your repossessed car will be sold in a public auction after 21 days.
Take note that during the process, the individuals repossessing your car cannot use any form of violence or physical force against you. Additionally, they should not insult you or use foul language. Lastly, they cannot seize your belongings that are inside the repossessed car.
Apart from having the power to sell your repossessed car, your bank can also charge you with a “deficiency” charge that you still owe them. There may be a deficiency hearing, and your bank may use any of your assets to pay off the remaining amount you still owe.
What to Do When Your Car is Repossessed
Here are six steps you can do when your car is repossessed:
Find out why the car got repossessed
If you’ve stopped making monthly payments on your car loan, the reason for repossession is obvious. The bank owns the car until you’ve paid the loan off, so it has the right to take back the car when you default on your loan.
However, if you’re on top of your loan payments and believe your repossessed car was a mistake, contact your bank immediately to find out the reason so that you can correct the situation.
Car repossession may happen for reasons other than failure to repay a car loan. The repo guy may have taken the wrong car. There might be some issues (on the bank’s end) with processing your payments, or your account might have been incorrectly tagged as delinquent. Or worse, it might be a case of the “assume balance” scam.
Get your belongings back
The authorities cannot withhold your stuff from the repossessed car. Coordinate with the bank on how you can get your belongings. If anything is missing or damaged, report it to the bank so they can take immediate action.
Decide if you can afford to recover your car
Yes, you can get your repossessed car back. However, it isn’t going to be easy. You need to act fast and come up with a realistic solution that won’t put you in deeper debt. Here are three possible options to get your repossessed car back:
- Redeem the car. To get your repossessed car back, pay all the remaining loan balance plus the storage and repossession fees before the bank puts the vehicle up for sale. The bank may have sent you a notice of sale, informing you of the time period and how to redeem the repossessed car.
- Restore your car loan. You may be allowed to reinstate your loan by paying the amount you’ve failed to repay plus the storage and repossession fees.
- Buy the repossessed car back. This may sound like an absurd idea, but if the car has sentimental value to you, it may be worth pushing for it. The bank may allow you to bid on the car when it’s up for sale.
Whether or not to recover your repossessed car is a serious decision to make. If you choose to go ahead with it, be warned that it might strain your finances. You might be tempted to borrow money from relatives and friends, which is a bad idea because you’re just burying yourself deeper in debt.
Take a long and hard look at your financial situation. Your car got repossessed for a reason—you cannot afford the vehicle you purchased. Is taking your car back worth the trouble? Can you manage to get back on your feet again after you retrieve the car? Will your situation improve over time? Give these things a careful thought before you attempt to recover your repossessed car.
Decide if you’ll keep or cancel your car insurance policy
If you have comprehensive car insurance and the financial means to get your repossessed car back, keep your policy active. The insurance may pay for any damages made to the car during repossession.
On the other hand, if you have the liability-only coverage and you can’t get the repossessed car back, it’s better to cancel the insurance right away rather than pay for it when you’re no longer using the vehicle. A repossession will increase your insurance rate on your next vehicle because of your bad credit history. But you can still reduce the insurance cost on your next car.
Let it go
Rather than spending your money on saving your repossessed car, you might be better off letting it go and saving up to buy a second-hand car. It’s a tough call, but it can be the only way to get out of a potential financial problem.
This time, be wiser and realistic about your next car purchase, so you’ll never have to experience repossession again. Go only for a reliable vehicle you can afford. Check out this article for tips on buying a used car.
Improve your credit history
Having your car repossessed puts a dent in your credit history, making it harder for you to get approved for new loans in the future. However, you can turn things around. For example, get a secured credit card, use it responsibly, and pay your credit card bills on time.
Tips to Avoid Car Repossession
No one wants their beloved car taken away from them. If you have the means, you can avoid your car being repossessed. Here are some tips you can consider:
Stay on top of your monthly payments
It’s a no-brainer. If you’re updated on your monthly payments, your bank is highly unlikely to repossess your car. Make sure to plan your finances and allot money—not just for your car loan—but for your other debt obligations. It will save you from headaches in the future.
Talk to your bank
If you’re in a tight financial spot, get on the phone with your bank and explain your situation. They may be open to working with you. Your bank may give you more time to make your car loan payment. As soon as you make the payment, get the receipt showing you’ve completed it. This will be useful when the repo man comes around.
If you can’t afford your car loan payments anymore, consider asking your bank about a refinance. Yes, you can do this. You can ask to extend your car loan term or lower your payment to an amount you can afford every month. Check out this article to learn how to negotiate your car loan payments.
Sell your car
Sell your vehicle and pay off your entire car loan. If you can’t afford to pay for your car, its insurance, and the fees that come with car ownership, you may be better off without it. It can be tough, especially If the car has a sentimental value to you. However, it will get the bank off your back. You also don’t have to worry about the monthly payment again.
Instead of waiting for the repo man to take your car away and ruining your credit history in the process, this may be a better option.
You may feel helpless, seeing your beloved vehicle taken away. While you cannot control everything that happens in your life, you can prevent car repossession from happening. Stay updated with your payments. Talk to your bank if you are experiencing financial problems and would want to refinance your car loan. If push comes to shove, consider selling your car. It can prevent the repo man from appearing at your doorstep and denting your credit history.
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