To properly execute a voluntary repossession, contact your lender to inform them of your inability to pay, arrange a specific date/time for drop-off, and sign a voluntary surrender document. Remove all personal belongings, clean the vehicle, bring all keys, and request a written, signed copy of the agreement. This process saves on towing fees, reduces stress, and may slightly lessen the impact on your credit, though the vehicle will still be sold to pay off your loan, leaving you responsible for any deficiency balance.
Summary: To perform voluntary repossession, inform the lender of your inability to pay, arrange voluntary repo, record details of the surrender, and pay off any sale-loan difference and fees.
In a Nutshell
Sometimes voluntarily returning your car is better than waiting for the lender to repossess the car, as it may reduce repossession costs, give you more control over the process, and help you avoid the embarrassment of an unexpected repossession.
However, the lender has absolutely no obligation to do so. Even though you want to surrender the vehicle the lender won't pick it up.
If you can't afford your car payments, you can give the car back to your car loan lender in a "voluntary repossession." But think carefully before you do this—you might still owe the lender money. If you can't afford your car payments, you can give the vehicle back to your car loan lender.
A voluntary surrender is slightly better than a repossession because it indicates to lenders that you're cooperative and accepting responsibility. However, it's still considered defaulting on your debt, and can make lenders reluctant to work with you in the future.
If you need to get out of a car loan you can't afford, options to consider include negotiating with your lender, refinancing your loan, selling the car or voluntarily surrendering it to avoid repossession. For many people, a car provides necessary transportation for work, school or other everyday needs.
Selling your vehicle will get you out of your loan while preventing damage to your credit score, but only if you're able to sell the car for the balance of the loan or pay the difference yourself.
Securing a car loan is possible with a repossession on your credit report. However, you may have a hard time finding a lender willing to work with you. If you do manage to get approved, the terms can be expensive.
A voluntary repo still shows as a repossession on your credit report for seven years. Your score can drop 100–150 points or more.
A voluntary repossession can stay on your credit report for seven years. This is true of both voluntary and involuntary repossession. Both voluntary and involuntary repossession can negatively impact your credit score for up to seven years; however, the impact will lessen over time.
Purchasing a car from a bank is often much cheaper than buying from a car dealer. This gap in price exists because repossessed cars usually have a history and could be in need of repairs or a new paint job. Some leased cars only require a few fixes, while others have bigger problems and end up costing more.
You may owe money
After surrendering a vehicle, you could stop financing it but might still owe money to the lender. The new amount due is normally the difference between the outstanding loan balance and what the lender receives from selling the vehicle. This is called the “deficiency.”
Factors That Determine Credit Scores
Voluntary termination of car finance is a legal right that allows you to end your car finance agreement early under certain conditions. It can be a useful option if you find yourself struggling with monthly payments or want to return the car and end the agreement.
Request a voluntary repossession
You could return the car to your lender as a voluntary repossession. Once you give the car back, the lender will sell it to recoup some of its losses. While this may sound like a solid option for getting out of a car loan, it can have some serious negative financial effects.
Keep your car in a spot where people aren't free to go.
Repo men can't enter your house, and may not be allowed to get into places like detached garages or other enclosed spaces, provided that the space is locked. Even a fenced-in area might be safe from intrusion.
One option you have is to show up and “redeem” the car (buy it back), by paying, in one lump sum, the balance remaining on the lease or loan, late fees, and repossession costs. Again, you can try to negotiate the price. A third option is to file a Chapter 13 bankruptcy.
While a voluntary surrender and a repossession are both considered negative as far as your credit is concerned, the impact of a voluntary surrender may be slightly less severe.
The rule addresses three components of car-buying: the (20%) down payment, (three-year) loan term and (8% of) your monthly budget. Following the rule could help you avoid a car purchase that overextends you financially.
A "609 dispute letter," often mischaracterized as a means of getting negative information removed from a credit report, is a name sometimes applied to a formal request for disclosure of credit information compiled by one of the national credit bureaus (Experian, TransUnion or Equifax).
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You can't typically get a car loan forgiven. However, many lenders offer hardship programs to help borrowers who are struggling to make their payments.
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