Total Loss Car Loan Overview

A total loss car loan can be difficult to deal with. Most of Americans have a car loan or liens against the title of the car, so when you are in a car accident where there is a total loss, the bank (or lien holder) will have some rights under the policy.

Note that the bank rights or the lien holders are only protected if you are making a claim against your own insurance company. Why? Because most auto policeshave financial responsibility clauses on them. These clauses essentially must protect the bank and not you. We will outline the process for dealing with a total loss car loan against your own insurance carrier below.

If you are dealing with someone else insurance company, they are not bound by an insurance policy and you do not have a policy with that carrier. They can simply make a payment to the one of the register owners of the vehicle.

Overview of the process for dealing with a car loan total loss:

You have a car loan. Then you get hit and your car is clearly a total loss. At the time of getting the policy, your agent should list the name of the lien holder. If they agent fail to do that, the adjuster will ask you when you are giving a recorded statement. They will ask again when the vehicle is inspected.

The adjuster will evaluate the car to determine its value, and then they will ask you for proof of ownership. Usually, you will have the registration of the car in which the bank is listed. Insurance companies will NOT issue payment (or they should not anyway) unless you can show ownership of the vehicle.

At some point you are going to have to give them all
your information about your bank. The account number, any telephone number, balance amount, interest rate, etc.

Basically everything regarding your car loan, the insurance adjuster will double check by calling the bank directly and asking them for the exact information about the loan.

Total Loss E-book

(Note: some insurance companies have total loss adjusters that are different from the liability or fault adjuster; however, the process should be the same).

The claim adjuster will find out what is the balance owed and then determine if the value of the car is less than the balance (you are upside down in the loan). If you owe more than the car is worth (according to the insurance company), then the insurance company will notify the bank.

The insurance company will then request a Letter of Guarantee from the bank in which the bank promises to surrender the title of the car to the insurance company in exchange of the payment of the fair market value.

You will have to argue the fair market value and try to increase that value.

What happens to the car loan total loss balance? In other words, what happens to the difference between the fair market value and the loan balance? You would still owe it! You are still required to continue making payments in your total loss car loan, even though you will not have possession of the car or the title to it. This is often referred as being up side down in your loan.You will have to argue the fair market value and try to increase that value.

Total Loss Car Loan