{"id":18242,"date":"2022-09-20T21:58:53","date_gmt":"2022-09-20T20:58:53","guid":{"rendered":"https:\/\/businessfinancenews.com\/?p=18242"},"modified":"2022-09-20T22:14:37","modified_gmt":"2022-09-20T21:14:37","slug":"voluntary-repossession","status":"publish","type":"post","link":"https:\/\/businessfinancenews.com\/loans\/voluntary-repossession\/","title":{"rendered":"Voluntary Repossession"},"content":{"rendered":"\n

Voluntary Repossession<\/h2>\n\n\n\n

voluntary repossession. When you fall behind on your car payments, you risk the lender repossessing your vehicle. Some people choose to go the route of voluntary repossession\u2014where they give back their vehicle voluntarily to reduce their debts. However, voluntary repossession can significantly impact your credit.<\/p>\n\n\n\n

If you can\u2019t afford your car payments anymore, it\u2019s crucial to have a plan of action. You need to know about voluntary repossession, as well as any alternatives to it. <\/p>\n\n\n\n

What is voluntary repossession?<\/h2>\n\n\n\n

When you purchase a vehicle on a payment plan, you agree to repossession terms. These terms state that after a specific amount of missed payments (loan default), the lender has the right to take back your vehicle without going to court. <\/p>\n\n\n\n

On the other hand, an individual may choose \u201cvoluntary repossession\u201d or \u201cvoluntary surrender.\u201d This is when individuals voluntarily return their vehicle to the auto lender because they know they can\u2019t make their payments any longer.<\/p>\n\n\n\n

Voluntary repossession requires you to reach out to your auto lender and notify them of your intent to return the vehicle. You explain that you can\u2019t afford your payments and arrange a time to drop off the car. <\/p>\n\n\n\n

But a voluntary repossession doesn\u2019t wipe out your loan. Your auto lender will sell the vehicle on your behalf. Once it\u2019s sold, they\u2019ll provide you with a receipt showing the sale and apply that credit to your loan. You\u2019ll still be responsible for paying the outstanding balance.<\/p>\n\n\n\n

This outstanding balance of what you owe minus what the car was sold for is known as a \u201cdeficiency balance.\u201d If there are any outstanding fees (late payment fees or prepayment fees), you\u2019ll still have to pay these as well. <\/p>\n\n\n\n

After a voluntary repossession, if you can\u2019t make the payments toward your deficiency balance, your debt can be sent to a collection agency. <\/a><\/p>\n\n\n\n

Does voluntary repossession protect your credit?<\/h2>\n\n\n\n

Unfortunately, a voluntary repossession still negatively impacts your credit. A voluntary repossession is considered a loan default and will show up on your credit report for up to seven years. But if you believe a repossession is inevitable, choosing this option can soften the blow to your credit and lower the total default. <\/p>\n\n\n\n

Additionally, after a voluntary repossession, you\u2019ll still likely owe money to the lender from the deficiency balance and any outstanding fees. If you default on these payments, that can be sent to a collection agency, which will be another mark on your credit report. A lender may also choose to take you to court if you default on the outstanding payments, which can lead to your wages being garnished. <\/p>\n\n\n\n

Overall, any repossession will make you look riskier to lenders in the future\u2014but a voluntary repo might make you look slightly better. Credit bureaus will note a voluntary repossession in your credit report, so future lenders can see you were proactive. If you apply for another car loan within the seven years after the initial negative item on your credit,<\/a> expect to be approved at high interest rates only. <\/p>\n\n\n\n

Why would someone choose voluntary repossession?<\/h2>\n\n\n\n

If repossession seems inevitable, it\u2019s still better to initiate it yourself. It shows that you understand the situation, are taking responsibility for it and are trying to get the lender what you owe them. A regular possession includes towing fees that are passed on to you when the lender sends a towing company to get your vehicle (without notice). If you act first and return the car willingly, you can avoid these fees. <\/p>\n\n\n\n

Some other benefits include: <\/p>\n\n\n\n