Regardless of whether you voluntarily surrender your car or it’s repossessed, it still affects your credit score. In extreme cases, after everything is said and done, it could drop your score as much as 100 points, though the amount varies depending on your credit situation. But, there are ways you can avoid repossession and save your credit.
Understanding Voluntary Repossession
Voluntary repossession is when you give up the car yourself instead of having a “repo man” come and take it. While you avoid repossession fees, it’s important to understand that even if you do give up the vehicle yourself, your credit is impacted as if it were taken by the repo man. The process of paying the loan balance by selling the car at auction and paying any deficiency balance once the vehicle is sold also remains the same – always keep this in mind. Just because you give your car up voluntarily doesn’t mean you have a leg up on someone who has their vehicle repossessed.
You’ll find that getting a car following a voluntary repossession won’t be easy either. Expect to need to wait at least a year after you give up your vehicle to be able to qualify for an auto loan. Even then, you'll typically have to apply for a subprime loan.
Preventing a Voluntary Repossession
You may be able to stop a repossession – voluntary or not – from occurring. How do you do this? You discuss your situation with your lender ahead of time before you start missing any payments. The worst thing you can do is wait until it’s too late and you’re forced to give up the car.
Most lenders are willing to work with you, and the sooner you discuss your situation with them, the more likely you’ll be able to keep your vehicle and avoid repossession. For example, they may allow you to skip a payment and they'll tack it on to the end of the loan term for short-term relief.
The Bottom Line
If you want to avoid having your car repossessed, the best way to do it is to stay in communication with your lender before any payments are missed. Be upfront about your situation and let them know that you still want to keep the vehicle. By doing so, you and the lender may be able to work around your current situation.
If you’re in need of a vehicle, but bad credit is in the way, Auto Credit Express wants to help. We work with a nationwide network of dealers that have lenders available to work with people in various stages of bad credit. Get started today by filling out our free auto loan request form.