Car Loan Payoff in Total Loss Situation

car accident, damage, crash-1538175.jpg

Posted by: Frisco Cutty Mar 14 2004, 12:57 PM

I recently totalled my vehicle. My insurance reperesentative informed me that there will be some calculations concerning the ACV and Salvage values of my car which will produce a remainder that will be applied to my existing loan. I still owe $5,800 on the loan and the aformentioned remainder from the ACV should be around $4,000, which leaves me with $1,800 to pay. I need to know whether the bank which I have been loaning the car through will be asking for that $1,800 in full upon receipt of the total loss information or whether I can continue paying it off at the regular price (or hopefully a prorated price).
Thanks for your time.

Posted by: loanuniverse Mar 14 2004, 02:51 PMFrisco:

I am not a consumer lender, but I would think that the lender will require payment in full. Meaning that they would like the whole $5,800.

Situations like this are why “Gap Insurance” was created. This type of insurance will cover the shortage between the insurance payment and the amount owed on the car.

I can not answer how the bank is going to react, but I think that the best way would be for them to try to work something out with you. Probably giving you some time to pay the remaining $1,800.

I would talk to a representative of the lender and ask him what the standard procedure is in a case like this. Ask direct questions like:

”What is the timeline?’

”who is responsible for the remainder?”

”how long do I have to pay it?”

”Considering that I am going to have to get another car, and make payments on that car, is it possible to work some new terms for this remaining amount?”

They are the only ones that can answer. In my opinion, you are responsible for the $1,800 and they can demand payment in full from you, so it is best to try to work something amicably with them.

Hope this helps.
Author: Commercial Loan Underwriter