If you have a car payment every month that is getting harder and harder to pay, you might be considering turning the car into the bank and looking for something you can afford. Maybe you’ve read somewhere that if you give your car to the bank or finance company yourself, it won’t show up as a repossession on your credit report, which will help minimize the damage to your credit score.
Equifax defines repossession as “the seizure of property that usually occurs as a result of nonpayment of a debt.” Since you are voluntarily turning your car in, the bank or lending company doesn’t have to “seize” it, which many people think will eliminate the possibility of a repossession appearing on their credit. Unfortunately, that isn’t the case.
A voluntary repossession is essentially returning the vehicle you can no longer pay for to the lender before the lender has to expend the effort to take it, and by the time you reach this point, you are probably two or more months behind on your payments. That means, your credit has already been damaged as late payments will drop your credit score substantially. By surrendering your vehicle, you are facing the inevitable head on, but that surrender is still considered a repossession. And, though it may be listed as voluntary on your credit report, it still carries the same weight as a regular repossession.
On top of that, once you turn your vehicle in, it will be sold at auction, and if the car doesn’t sell for what you owe on it, that remaining deficiency balance will be your responsibility. So, either voluntary or not, a repossession may cost you much more than just bad credit.
Consider all your options before making this decision.Wallethub provides a list of steps you can try that might help you achieve a better outcome than just by handing over the keys.
Equifax defines repossession as “the seizure of property that usually occurs as a result of nonpayment of a debt.” Since you are voluntarily turning your car in, the bank or lending company doesn’t have to “seize” it, which many people think will eliminate the possibility of a repossession appearing on their credit. Unfortunately, that isn’t the case.
A voluntary repossession is essentially returning the vehicle you can no longer pay for to the lender before the lender has to expend the effort to take it, and by the time you reach this point, you are probably two or more months behind on your payments. That means, your credit has already been damaged as late payments will drop your credit score substantially. By surrendering your vehicle, you are facing the inevitable head on, but that surrender is still considered a repossession. And, though it may be listed as voluntary on your credit report, it still carries the same weight as a regular repossession.
On top of that, once you turn your vehicle in, it will be sold at auction, and if the car doesn’t sell for what you owe on it, that remaining deficiency balance will be your responsibility. So, either voluntary or not, a repossession may cost you much more than just bad credit.
Consider all your options before making this decision.
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