A repossession or voluntary surrender also known as a voluntary repossession occurs when someone cannot afford the payment on their vehicle anymore. The proactive approach would be to inform the lender you can no longer make payments. Bot scenarios will harm your credit score. When the lender hires a recovery company to tow your vehicle, they will apply those charges to your total debt, and this will reflect on a larger amount on your credit report then what you originally owed.

To begin the process of a voluntary surrender you need to inform the lender that you cannot afford the payments and you intend to return the vehicle. A time and place must be arranged, to whom and where you dropped it off and be sure you keep written records of everything. Normally the lender will re-sell the vehicle and they may send you a statement of the bill of sale. You would still be responsible for the difference between what the vehicle was sold for and what you still owe the lender this is known as a deficiency balance. The lender may charge you for late fees.

When you cannot afford to pay the deficiency balances your debt it will be reported to the credit bureaus as a collection. A repossession is loan defaults, that can stay on your credit reports for seven years. This can negatively impact your credit score especially the next time you apply for another car. If you do get approved, you will be deemed high risk and be charged an outrageous interest rate.

Voluntary repossession can be avoided in many ways. Sometime if you talk to your lender and make repayment arrangements can be a simple solution, they may accept partial payments as good faith. In some cases, you can also transfer your car loan to a family member who is wiling to take over payments. You may attempt to refinance to lower your monthly payments during a longer period. A last resort would be to sell your car, in most cases it would be for less than what you owe the bank however you would only be responsible for the balance difference, and this would not have a negative impact t on your credit reports.


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