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- Unless a person has a loan with an unusually brief repayment period, vehicles depreciate at a rate that is faster than a consumer can pay off the loan. Almost every vehicle on the road today with a loan or lease attached to it is worth less than the balan
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Is it true that Oklahoma and Illinois do not allow the collection on deficiency balances for repossessed vehicles?
I have a minivan that I am "upside down" in with the loan. I'm considering a voluntary repossession. I bought the car in Oklahoma but not live in Illinois, I was told by a friend that neither state would try to collect for the remaining balance. I owe over $10,000 on the van and it might be worth $3,000. I have tried to get the (CitiFinancial Auto) financial company to give me a lower payoff amount so that I could just pay it off and save some money but they wouldn't agree to the amount I asked for. I hate to keep paying for a car that isn't worth what I'm paying for it. It also has had a lot of mechanical problems as well.
Almost every vehicle on the road today with a loan or lease attached to it is worth less than the balance of the loan. The fact that your minivan is worth $3,000 and you have a $10,000 loan amount is not surprising, unusual, or a reason to consider a voluntary repossession.
Why is this so? Unless a person has a loan with an unusually brief repayment period, vehicles depreciate at a rate that is faster than a consumer can pay off the loan. According to a 2007 study by the American Automobile Association, the average annual cost of depreciation on a new vehicle is $3,392 per year. A new vehicle loses 15% to 20% of its value the moment a consumer buys it and turns it into a used car. Therefore, buyers who borrow money to buy a vehicle, or lease a vehicle should expect to be upside down for the duration of their loans.
If the friend who told you that Oklahoma and Illinois do not allow the collection on deficiency balances for repossessed vehicles is an attorney and you are his or her client, then you should believe your friend's legal advice and act accordingly. Unfortunately, the information your friend gave you is hogwash and an urban myth readers have shared with Bills.com before.
The truth is if a borrower allows a repossession of their vehicle, the creditor will sell the vehicle at auction and apply the sale price to the balance of the loan. If the sale price is less than the balance, this is known as a deficiency balance. The borrower must pay the creditor the deficiency balance plus the cost of the repossession. All of this is spelled out in a loan contract and each state's laws.
The fact that a vehicle is hobbled by mechanical defects is not a legal excuse to break the loan contract without consequence.
A deficiency balance is an unsecured debt, much like credit card debt, medical bill, or a payday loan. As such, it can be resolved in a debt settlement program. See the Bills.com debt savings center to get no-cost quotes from pre-screened service providers. See the Bills.com resource Advise on voluntary repossession to learn more.
I hope this information helps you Find. Learn & Save.
Best,
Bill
www.bills.com/
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Debt statistics
Mortgages, credit cards, student loans, personal loans, and auto loans are common types of debts. According to the NY Federal Reserve total household debt as of Q1 2024 was $17.69 trillion. Housing debt totaled $12.82 trillion and non-housing debt was $4.88 trillion.
According to data gathered by Urban.org from a sample of credit reports, about 26% of people in the US have some kind of debt in collections. The median debt in collections is $1,739. Student loans and auto loans are common types of debt. Of people holding student debt, approximately 10% had student loans in collections. The national Auto/Retail debt delinquency rate was 4%.
The amount of debt and debt in collections vary by state. For example, in Indiana, 28% have any kind of debt in collections and the median debt in collections is $1721. Medical debt is common and 16% have that in collections. The median medical debt in collections is $748.
Avoiding collections isn’t always possible. A sudden loss of employment, death in the family, or sickness can lead to financial hardship. Fortunately, there are many ways to deal with debt including an aggressive payment plan, debt consolidation loan, or a negotiated settlement.
