PAULCLINE360 said:
This is Paul from Florida again. I think my question was misunderstood. I want to know why the insuarance company has to pay the bank instead of me? I understand the insuarance company is only responsible for the value of the vehicle and not the loan amount. It just doesnt seem fair that the bank would get this money instead of me.This will leave me with no vehicle and I will still have a payment on the amount that I was upside down.
My response:
Paul, the bank is the legal owner of the car until it's paid in full. At this time, you are only the registered owner. The insurance company must pay whomever is the actual, legal, owner of the vehicle. The bank has a security interest in the vehicle for the loan amount.
Let's say that the insurance company paid you directly, and you bought another car with that money. The bank would have no "security interest" in your new car, and your new car would be placed in your name as the legal AND registered owner. The papers on the new car would not go to the bank, so the bank would be holding worthless paper - - hoping and praying that you would not "run away" and still continue your loan payments on that worthless paper. That's not how banks work.
Additionally, if you read your insurance policy, it says somewhere in there that all benefits are payable to the legal owner - - in your case, the bank.
When the car has been paid off, then you can get a new loan and start all over again. That way, the bank will obtain a security interest in that new vehicle.
Good luck.
IAAL
