When hearing about the repossession, fear in borrowers’ hearts often arises. After all, it means lenders can take property or assets when the borrower defaults, or, in simpler terms, fails to fulfill their payment obligations. No matter how you spin it, losing a home or a vehicle is a serious consequence.
Because of how big of a problem it is, we’re helping you understand what repossession is, how it works, and, most importantly, how to avoid it. At the same time, we will explain why you shouldn’t be afraid of both repossession and instant money lenders in Singapore, especially during difficult times.
What is repossession?
Repossession is the legal procedure by which a lender reclaims property or assets used as collateral for a loan when the borrower fails to satisfy their repayment requirements. This procedure applies to a variety of loans, including auto loans, mortgage loans, and personal loans, in which assets such as vehicles or residences are used as collateral.
How do repossessions work?
For the process, there are two types of repossession: involuntary and voluntary. When a lender sends a debt collector to seize the defaulted property to secure the loan, this is known as involuntary repossession. Whereas, voluntary repossession happens when the borrower decides to surrender the collateral to avoid the additional costs associated with involuntary repossession.
The money lender will sell the surrendered property in both circumstances to recover as much of the unpaid sum as is feasible. You will then be responsible for any remaining balance not covered by the sale. You will be notified of the sale and will be able to bid on it. Keep in mind that only cash is accepted at auctions.
For borrowers, repossession can have serious consequences. It not only results in the loss of the collateral asset, but it can also harm your credit score, making it difficult to obtain loans or funding in the future. The worst news is that your repossession status will appear on your credit for 7 years. It can lead to legal and financial issues, such as the borrower continuing to owe money after the asset is confiscated and sold.
How do I avoid repossession?
Maintaining financial stability is important. That is why we have to avoid repossession as much as we can, as this is the worst and last resort way the lenders get your attention when you fail to make repayment.
The classic recommendation here is to make on-time payments. And when you’re having difficulty making payments on time, talk to your money lender. By discussing payment options or changes to our loan terms, the money lender can give us alternatives such as loan restructuring or refinancing. This can lead our money lender not negatively to impact our credit score or history.
Once you’ve agreed with the money lender, be sure to secure a written agreement, not only a verbal one, as that is the only way to protect yourself if the lender is untrustworthy of your updated contract loan.
After repossession
For borrowers, repossession can have serious consequences. It not only results in the loss of the collateral asset, but it can also harm your credit score, making it difficult to obtain loans or funding in the future. The worst news is that your repossession status will appear on your credit for 7 years. It can lead to legal and financial issues, such as the borrower continuing to owe money after the asset is confiscated and sold.
However, it’s not all doom and gloom. If your repossession is voluntary, you can avoid further fees by returning your property to the lender voluntarily. You also won\’t have to worry about bill collectors knocking on your door. It should also serve as a lesson.
Once the repossession process has been completed, you should get your credit report so you can check the details. You have the right to dispute any erroneous information provided by the lender.
On the other hand, if you believe your property was wrongfully taken away, you can go to an attorney to dispute the repossession. There are numerous regulations regarding the repossession process; therefore, if you document something illegal, you may be able to reclaim your property.
Rebuilding your credit score after repossession
If the repossession agency did everything correctly and your vehicle or other property deserved to be declared permanently lost, your only option is to make an effort to rebuild your credit history and improve your credit score.
You can add a statement to your credit report detailing what happened that led to the recall to further safeguard your name. It will not eliminate the notification, but it will allow you to explain it to future lenders. But keep in mind that if lenders read consumer remarks in credit reports (and they may help decrease concerns), they will not help you raise your credit score even if they lend you money and you pay them properly.
Conclusion
Going through repossession is emotionally and financially difficult. That is why you must do your best to avoid it. And as long as you pay sufficiently and on time, you’re on the right track. But if it does happen to you, it’s not the end of the world. At the very least, it can be an opportunity to get back on track. Being proactive and examining your credit and financial reports will help you avoid another recall.