What is Voluntary Repossession?
Voluntary repossession is a process in which car owners choose to give back their vehicles to the lender, typically because they are unable to meet the terms of their loan.
This decision should be made after careful consideration, as it involves significant financial and legal consequences.
In most cases of repossession, creditors have the legal authority to seize cars from borrowers who default on their payments. By voluntarily surrendering the vehicle, however, car owners can avoid this outcome and attempt to keep their credit intact.
Ultimately, voluntary repossession is a decision that should be considered carefully by anyone who is struggling to make payments on their car loan. Although it has some downsides, it can also provide much-needed relief in certain difficult situations.
How Does the Voluntary Repossession Process Work?
This process essentially allows you to surrender your car voluntarily to avoid any court fees, other costs, and reduce the impact to your credit.
Step 1: Notify Your Lender
To begin the process, you will typically need to notify the lender that you financed the vehicle through about the decision to give back the vehicle.
During this conversation, you’ll have to let them know that you want to surrender the car due to the inability to make payments. At this time you may have the opportunity to negotiate and explore other solutions if that’s of interest.
Step 2: Schedule an Appointment to Surrender the Vehicle
You’ll need to schedule a time and place to give the car back to your lender. At this point you’ll also complete any paperwork required.
You’ll of course be turning over the keys at this point, so be sure to coordinate a ride back home.
Step 3: Car Inspection
Your car will be resold by the lender, so there will have to be an inspection after you surrender the vehicle so review its condition.
Step 4: Sale of the Vehicle
Your vehicle will then be sold either as an individual sale or at a car auction. Similar to an involuntary repossession, you may be held responsible for any outstanding balance if the amount you owed on the vehicle exceeds the selling price.
Why Volunteer To Surrender Your Car?
Pros of Voluntary Repossession
- Avoiding legal fees
- Avoiding other costs and fees associated with an involuntary repo
- Less stressful than a forced repossession
Cons of Voluntary Repossession
- Lack of a vehicle
- Still potentially responsible for some payments and fees
- Can be more costly than other methods of getting your loan back on track
When Voluntary Surrender for Your Vehicle Makes Sense
Ultimately, you’ll need to carefully consider your specific circumstances and weigh the pros and cons to determine if a voluntary repossession could be a good decision.
You should consider alternative routes to getting your loan back on track before jumping to this, however. Here are a few other solutions to consider:
- Refinance your vehicle – Especially if you are in a better credit situation than when you initially purchased the vehicle, you may be able to extend your term and make your payments more manageable.
- Trade in your car for a more affordable one – You may be able to avoid a repo altogether if you can trade in your car for a cheaper one. Just beware of your vehicle’s equity, as this can impact the difficulty of this process.