Having your car repossessed is a stressful situation that sometimes is impossible to avoid. But, if you know your vehicle is going to be taken, something to consider is a voluntary repossession.
What You Need to Know
A voluntary repossession is exactly what it sounds like: you volunteer to have your car repossessed by taking it to the dealership or lender and turning it in. This can be a viable option if you're falling behind on auto loan payments. The biggest benefit of this is avoiding many of the lender’s costs of repossessing your car, which you will be responsible for.
There are, however, some important things you should be aware of:
- Your credit is still affected – Any missed payments leading up to your voluntary repossession will go on your credit reports, as will the repossession itself. This will stay on your reports for seven years and your credit score will drop.
- Voluntary repossession doesn’t cancel out a loan – Similar to an involuntary repossession, the lender will sell the vehicle to cover the loan balance. Depending on how much the car sells for, you may still need to come up with a remaining balance on the loan.
- Getting another car won’t be easy – You typically won’t be able to finance another car for at least a year following a repo, whether voluntary or not. Most lenders won’t be willing to approve you for a car loan once they see the repossession on your credit report. If you really need a car soon after, many buyers opt for a buy here pay here dealership, where they typically don’t check credit reports.
- You could keep your car – If you want to pursue this option, you'll have to act quickly. You might be able to avoid repossession by catching up on any missed payments or refinancing your auto loan.
The best way to avoid repossession is to make sure you don’t find yourself at the point where it’s too late to do anything. Make sure you budget and make your loan payments on time. It can take just one missed payment for your car to be repossessed in some cases.
If you’re in need of a car, but bad credit is in the way, Auto Credit Express wants to help. We work with a nationwide network of dealers who 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.