Remember: any unused student loan money is still part of your loan and must be repaid. You are responsible for paying interest on the unused funds, even if you don't use them at the original disbursement date.
If you do not use the loan your credit score will not change. The impact to the credit score has already occurred due to your applying for the loan. If you signed a contract to buy the vehicle you have not collected, you will likely be stuck with the vehicle. Unless you can get the dealer to undo the deal.
In most cases, you can ask your lender to take the car back, however if you still owe more on the car than what the pay off value is, you will have to pay the difference.
If you don't pay off the debt by the end date, it means you're not making the minimum monthly payment. The consequences of that can range from late fees, to having the car repo'd, destroying your credit and being sued for the difference.
You can sell your car if you still owe money on it. But you'll need to pay off the debt before you can transfer the title to the car's new owner. The process differs depending on whether you're selling the car to a dealership or a private buyer.
Your lender can repossess your car when you make partial payments, regardless of the past payment history. Generally, it is assumed that partial payments equate to a breach of the contract between the lender and the debtor. Therefore, the lender has the right to repossess your car if you make partial payments.
One way to get out of a car loan is to sell the vehicle privately. If you're not upside down on the loan, meaning the car is more valuable than what you currently owe on it, you can use the proceeds of the sale to pay off the current loan in full. Another term for an upside-down car loan is negative equity.
Does voluntary repossession hurt your credit? Voluntary surrender counts as a derogatory or negative mark and will stay on your credit reports for up to seven years. This stain on your credit reports might prevent you from being approved for new credit and your terms, like interest rates, will likely be higher.
Voluntarily Surrender the Car
That said, if there's a deficiency balance—your loan balance minus what the lender received for your car at auction plus any additional fees—you'll need to pay it. If you can't, the lender may send the remaining debt to collections, which can damage your credit further.
By paying half of your monthly payment every two weeks, each year your auto loan company will receive the equivalent of 13 monthly payments instead of 12. This simple technique can shave time off your auto loan and could save you hundreds or even thousands of dollars in interest.
Car loans are secured debts, so the lender can repossess your vehicle if you stop making payments. A surrender is when you as the owner voluntarily gives the vehicle back to the lender when you file for insolvency proceedings.
If you have taken out an unsecured loan, your lender is not concerned about the end goal of the loan amount, so you have free rein over how you choose to spend the loan. They're only concerned when you fail to meet up with your repayment date.
Leftover money is a misleading way to think about cash left over after buying a car. This money is still part of your debt to the lender, so you will have to pay it back.
After 30 days, your lender needs to make another hard credit inquiry to apply for another loan. If you have a change of heart on the car you want and select another vehicle that costs more, you'll be outside of the approved loan amount and need to start over.
Voluntary car repossession is only a slightly better option than involuntary repossession. You may be a bit more prepared and have some control over when you surrender your car if it's voluntary. Avoiding some of the extra fees that can come with involuntary repossession can be helpful, too.
Note: If you're selling a car with an active loan, you're still the one responsible for paying it off, so the remaining balance on the loan will likely be subtracted from the price the dealer offers you. So if you owe more than what the dealer offers, you'll need to pay the difference to the lienholder.
CarMax buys vehicles that are not paid off. To sell a car you still owe money on to the retailer, you must provide loan information so CarMax can pay off the lender. If you owe more than your offer, you will need to cover the difference.
They can sue you for the balance you didn't pay for the down payment, but unless it was in the contract they can repossess, the law in CA doesn't allow it. Under California law, a breach of contract occurs when one party fails to fulfill a legal duty the contract created and causes damages for the defendant.
Having your car repossessed or surrendering it voluntarily is seen as a major negative event by lenders. They'll view you as high-risk. Expect your credit score to take a big hit, maybe over 100 points or more. That makes getting approved for financing in the future much harder.
Can I make a partial payment on a car loan? You may think that if you make a partial payment it will help to mitigate the damage. While making a partial payment will apply towards your loan and reduce the amount you owe, if you do not make the payment in full it will still be marked as late.
Even falling one payment behind is enough for a lender to repossess your car. Usually, a loan is two or three months behind before the lender initiates a repossession. At that point, the lender can seize the vehicle, often without warning, and then sell it to recover the loan balance.
But, if you have no other options, remember this is not the end of the world, and there are ways to rebuild your credit. If your car is at risk of repossession, it's crucial to explore your options for catching up on your loan. You must not ignore the situation, thinking it might just go away.