What is Voluntary Repossession?
Voluntary repossession is when you proactively return your vehicle to the lender because you can no longer make payments. While it may seem counterintuitive, there are situations where asking your bank to repossess your car can be a viable option.
When to Consider Voluntary Repossession
You might consider voluntary repossession if:
• You’ve exhausted all other options to keep up with payments
• Selling the car yourself isn’t feasible
• You want to avoid the stress and embarrassment of involuntary repossession
Before taking this step, it’s crucial to understand the implications and explore alternatives.
Steps to Take Before Requesting Repossession
Communicate with your lender about your financial situation
Ask about loan modification options or payment plans
Consider refinancing your auto loan for better terms
Explore the possibility of selling the car privately
The Voluntary Repossession Process
If you decide to proceed with voluntary repossession:
Contact your lender to explain your situation
Arrange a time and place to surrender the vehicle
Remove all personal belongings from the car
Hand over the keys and relevant documentation
Remember, voluntary repossession will still negatively impact your credit score, but it may be less damaging than involuntary repossession.
Financial Implications of Voluntary Repossession
• Your credit score will likely decrease
• You may still owe money if the car sells for less than your loan balance
• Future loan applications could be affected
Alternatives to Consider
Before opting for voluntary repossession, explore these alternatives:
• Negotiate with your lender for temporary payment relief
• Seek assistance from credit counseling agencies
• Look into debt consolidation options
• Consider a car trade-in for a more affordable vehicle
Legal Considerations
• Understand your rights under consumer protection laws
• Review your loan agreement for specific repossession clauses
• Consider consulting with a financial advisor or attorney