Borrowers sometimes think of lenders as the enemy — that the lender is just waiting to pounce after that one missed payment, taking back the assets and leaving the borrower with nothing. They think that’s a win for the lender, who ends up with both the asset — like a home or a car — and the borrower’s money. It’s the borrower who loses, with the hit to his or her credit score.
While having an asset repossessed does hurt your credit, the thing to remember here is that that’s not what the lender wants. It’s a lose/lose situation. The lender wants you to keep the asset and keep making the payments.
Take cars, for example. In 2012, one report noted that lenders lost over $7,000 for every car or truck that they repossessed. It hurt them and the borrower at the same time.
Repossessing your car doesn’t leave the lender with a valuable asset. Values drop very quickly on used cars. The lender probably has to sell it at a loss, quickly, just to get rid of it. The bank doesn’t want your car and doesn’t make money off of it. The bank just loses less by taking your car — as opposed to letting you keep it and not pay — so they have to repossess it to cut their losses. But they are still losing money.
There are options you can use to stop the repossession of your assets. Lenders may be glad that you’re going to use them if it means they get more of their money back. You absolutely want to look into all of your options and understand what you can do to protect what you own.
Source: AutoTrader, “Missed Car Payments Don’t Have to Lead to Repossession,” Russ Heaps, accessed Dec. 22, 2016