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What happens if your car loan is charged off?

I’ve missed multiple car loan payments. The lender said the loan might be charged off soon, but what happens if your car loan is charged off? Is the debt just forgiven?

avatar
Jack Walsh · Updated on
Reviewed by Shannon Martin, Licensed Insurance Agent.
If your
car loan
is charged off, you’re still responsible for the debt, but it’ll be paid through a collections agency rather than the original lender
Once the collections agency takes over your loan:
  • Your credit score will take a hit.
  • You’ll face the possibility of repossession.
  • You could be sued for the balance of the loan. 
Unfortunately, these consequences will also likely create issues when you attempt to apply for
car loans in the future
.
Keep in mind: If your lender hasn’t yet charged off your loan, there may still be time to negotiate a repayment plan or a refinance with them. In some situations, lenders will even negotiate a settlement for a percentage of what you owe rather than pushing to collect the full balance of the debt.
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