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What happens when your car loan is charged off?
I had been struggling to make the remaining two payments left on my loan, and fortunately, the lender said they wouldn’t repossess my car. I was dealing with some family matters and a few months later, I received a letter from the lender saying the debt had been charged off. What happens when your car loan is charged off?
Jack Walsh · Updated on
Reviewed by Shannon Martin, Licensed Insurance Agent.
I’m relieved to hear your car wasn’t repossessed, especially with only two payments left!
When a
car loan
is charged off, the lender believes the remaining debt is uncollectible. That said, the debt isn’t forgiven, so you will still need to make payments. Once charged off, the lender likely offloaded the debt to a collection agency, so you will have to settle the debt with them directly. If the collection agency hasn’t reached out yet, ask your lender for their contact information.
Additionally, the charge off negatively affects your credit score and will appear as a judgment on your credit history, so it is crucial to pay it off as soon as possible.
Once the debt has been settled, and the
lienholder
is removed from the title, it’s a great time to review your car insurance
policy. If you want to ensure you’re not overpaying for coverage or are looking to make changes, download
Jerry
. Jerry is an insurance comparison app that collects quotes from 50+ top insurance companies, like Travelers, Nationwide, and Progressive, in seconds. The average Jerry user saves $879 a year on car insurance!View full answer
- Gregory R.
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