What To Do If You Can’t Repay Your Car Loan?

By | February 28, 2019

Is repaying your Car Loan becoming a matter of concern? Here’s what you can do about it.

Got your dream car with a Car Loan? Congratulations! Now, an overwhelming majority of all car purchases in India take place through Car Loans that are easily available thanks to the presence of various banks and other financing institutions. However, with any loan comes the responsibility of paying off the borrowed credit on time and in full.

Unforeseen circumstances can land you in a soup. You may have had a major life change as a result of a massive personal emergency or a situation that leads you to permanent unemployment. Or maybe your personal finances tanked due to a crisis.

Additional Reading: Dealing with a car loan default!

Paying off your Car Loan can become quite a herculean task when grappling with unfortunate circumstances. But, don’t you worry! We’re here to help sort things out for you.

Selling or refinancing

If you find yourself burdened by your Car Loan EMI, the first thing to do is to determine the worth of your car and compare it to the outstanding loan amount. If you owe an amount that’s less than your car’s value, then congratulations! You’ve got equity!

What we mean by equity here is the valuation of your car is higher. So, in the event that you can’t repay the loan, you can easily sell the car to a car merchant or any other private party and pay off the loan. By selling off your car to clear your loan dues you minimize the chances of hurting your Credit Score due to loan defaults and missed payments!

In the event that you don’t have equity, selling off your car is not the best solution. We’re saying this because your car won’t fetch an amount higher than your dues, which is to say that you’ll have to pay off the difference between the amount you owe and the price your car fetches. This is where refinancing comes into the picture!

By refinancing your Car Loan, you’re basically opting for a longer tenure to repay the loan and possibly, at a higher rate of interest! By stretching out your loan term, you can commit to more manageable payments.

Additional Reading: Car Loan Refinancing: Is It A Good Idea?

Getting in touch with your lender

If you’re unable to repay your Car Loan dues, one of the primary measures you can take is to communicate with your lender. This can make quite a difference between enabling you to keep your car and its unfortunate repossession.

Call your lender right away and inform him of the reasons why you’re unable to complete your Car Loan EMI payments. Usually, banks are prepared to help customers by understanding their situation and providing possible solutions to help the borrower.

Don’t withhold any information while communicating your problems to the bank. Whether it’s a death in the family, a serious medical emergency, a layoff at work, or any other critical life event that has turned your finances upside-down, it’s necessary that you inform the lender.

Additional Reading: Drama Lama’s Car Loan Dilemma

The concerned bank might help you out by giving you an EMI holiday, which is to say that you’ll get a buffer period of a few months to get back on track before commencing your EMI payments. Or, the bank might even reduce your EMIs depending on the criticality of your situation. Some banks even stretch your loan tenure to help you make small monthly payments without disrupting your finances. Remember that lenders only resort to repossession if they have exhausted other choices.


When it comes to repossession, the concerned bank takes the vehicle away under circumstances such as loan default. However, if your car is repossessed by the bank, there’s still a way to get back your car by paying your dues.

Additional Reading: Everything You Need To Know About Car Loan Transfer

Once the car has been repossessed, the lender might still allow you a way to get it back by redeeming or reinstating your repossession. If you’re given this option, act fast because the window for getting your car back is quite short. Usually, it is less than two weeks.

However, getting your car back can prove quite expensive. Commonly, you’ll be expected to pay a sum that pays for the outstanding balance along with penalty charges. In the event that you’re unable to redeem or reinstate your repossession, the vehicle will be sent to an auction for sale.

Your responsibilities won’t end just yet, though. You’ll be held responsible for the difference between the amount it sold for and the remainder of the loan — as well as repossession costs.

Pro Tip: Did you know that Used Car Loans are a boon to buyers as these have low interest rates! Interested? We’ve got you covered!

Voluntary repossession

This should be your last resort. Try thing only after having considered the above possibilities.  Under unavoidable circumstances, if you decide to arrange a drop off the vehicle to the bank, it stands for a voluntary surrender.

However, it’s important for you to bear in mind that lenders look at repossession and voluntary surrender as a failure on your part to comply with the terms of the loan agreement. Also, remember that this’ll show up in your credit report.

Additional Reading: Importance of the car loan surrender letter!

If you’re in a tough spot with your Car Loan repayment, we hope this article will prove useful to you. If you’re on the lookout for other types of loans such as a Personal Loan and Home Loan, or Credit Cards for your everyday needs, we’ve got your back!

All information including news articles and blogs published on this website are strictly for general information purpose only. BankBazaar does not provide any warranty about the authenticity and accuracy of such information. BankBazaar will not be held responsible for any loss and/or damage that arises or is incurred by use of such information. Rates and offers as may be applicable at the time of applying for a product may vary from that mentioned above. Please visit www.bankbazaar.com for the latest rates/offers.

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