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Behind on car payments? Here's advice on how to avoid the repo man

As the economic slump continues, many people are struggling to make ends meet, and unfortunately, vehicle repossessions are on the rise.

Having a car repossessed hinders more than just a car owner's mobility; it has a severe impact on credit scores, thereby limiting the ability to get loans or credit cards for up to seven years.

The Better Business Bureau (BBB) of Minnesota and North Dakota advises troubled car owners on how to avoid losing their vehicle and their creditworthiness.

According to the American Bankers Association, the number of direct auto loans that were at least 30 days delinquent increased from 2.03 percent to 3.01 percent during the first quarter of 2009, and delinquent auto loans through dealers hit 3.4 percent in March.

The number of repossessed vehicles jumped 12 percent to 1.67 million nationally in 2008 and is expected to increase by another 5 percent in 2009, according to Manheim Consulting.

"The worst thing you could do when falling behind on a car payment is to bury your head in the sand and ignore the problem," said Dana Badgerow, president and CEO of the Better Business Bureau of Minnesota and North Dakota. "To prevent repossession, and the negative effect on personal credit scores, automobile owners have to take responsible action and face the issue head on."

If a lender chooses to sell the car at auction, and it is bought for less than the outstanding loan, the original owner may still be on the hook to pay it back in addition to added fees - essentially paying for a car they no longer own.

The BBB recommends car owners take the following steps when behind on car payments:

Contact your lender. According to the American Financial Services Association (AFSA), auto repossessions cost creditors about $8,000. Therefore, the best-case scenario for you and your lender is to keep you in your car and making payments. Lenders will often work with troubled borrowers to develop more agreeable payment plans. Some possible options, according to AFSA, are loan refinancing, extending or deferring payments, changing payment due dates and waiving fees.

Cut costs elsewhere. For many people where public transportation is scarce, a car is a necessity for getting to work, the grocery store or school. If you can't afford to lose your car, consider the items you pay for that you can afford to do without: cable TV, eating out, cigarettes and new clothes are a few examples.

Choose a less expensive vehicle. If you're not upside down on your loan, and can pay off the loan on the vehicle by selling it, consider finding a less expensive auto with monthly payments that are within your means.

Do your research before enlisting any debt management help. Some businesses offer assistance in debt management and repo prevention. Be wary of offers and sales pitches that require up front fees, and always research the organization with the BBB before doing business with them.

Consider enlisting the help of a credit counseling agency as they offer inexpensive, and in some cases free, guidance on how to manage money. Find a credit counseling agency through the National Foundation for Credit Counseling at

Contact the BBB at or 1-800-646-6222.