The term Voluntary Repo involves turning the car over to lenders or maybe creditors instead of waiting for the car to be repossessed forcibly. If you are unable to afford a car payment, then Voluntary repossession seems the perfect way to get the car loan off your own hands.
It can happen to any individual. It may possibly be due to losing your job or maybe an increase in substantial expenses. Whenever you know that the car payments are not going to be paid, then it will be the best time to do something for yourself. Voluntary Repossession is a perfect option but before doing so, you need to understand how the process works.
What is Voluntary Repossession?
In this process, you are returning your auto to the lender when you are not able to make the vehicle payment. You inform the lender that you are unable to make the payment and want to surrender your car. It is named voluntary because you may request and arrange everything instead of wait for the creditor to come and get your vehicle.
The lender can repossess your vehicle and sell it if you stop making your loan payments. The sales pay down the loan payment. You can then stop making your regular loan payments. If the car sells less than your loan balance, then you still owe money to the lenders.
Why Go Voluntary?
With the help of Voluntary Repo, you can easily eliminate the cost and chaos which are associated with dealing with any repo man. Some more reasons are given below:
- Easier experience
In a non-voluntary repossession, creditors or lenders sent a repo agent to take your vehicle. You, in this case, are unaware of what will happen next. Lender agents may pick your car either from your workplace, parking area or from home. They may follow or use GPS to locate where your vehicle is. It will be worst, anxiety-producing and inconvenient conditions. Instead of facing non-voluntary repo, it will be better to go for a Voluntary Repo.
Traditional repo is an expensive one because it requires the involvement of a repo agent, towing company and more. In that case, a voluntary repo will be not only easier but cost-saving, you should inform the lender that you will be unable to make further payments and makes some arrangement to surrender your vehicle.
- Credit history
One of the other lingering effects of the repo is the damage to your credit history. When you surrender your vehicle this can help to show creditors goodwill and a responsible attitude that can help you in future situations.
How does Voluntary Repo work?
One of the best and preliminary steps is to tell the lender that you are no longer making further payments. You tell them that you want to surrender your vehicle. You properly set the time and location to return your vehicle and hand-over the vehicle keys.
It is important to note the time, date as well as the contact information of that individual whom you hand-over the car. It is so because it will be best for you if the lender may have any questions or issues arisen related to the repo in the future.
How it affects your finances?
Voluntary Repo may affect your financial life in the following way:
a) You may owe money to your lender still
The lender tries to sell your vehicle to make a remaining balance of the loan that is not paid by you. If the sale falls short of the amount you owe, you will also responsible to pay the balance after the sale with some additional fees like prepayment and late-payment fees. The lender may take you to the court where you have to pay the remaining balance of the loan.
b) It will show up on your credit reports
With court judgments and the resulting collection, the loan may remain for seven-year as the “Derogatory mark” on a credit report. Instead of repossession, the credit report will list “Voluntary surrender” on credit reports that will lessen the damage to your credit history.
c) Your finances
If the vehicle has been sold at an auction and the sale amount does not cover your owned amount, then you may have a low balance. If you are unable to pay this remaining of the loan, then it can be sent to the collection which will add a burden to your finances. So, you may end up having a collection account on the credit reports for about 7-years also.
An alternative way to Voluntary repo
Before deciding to give your vehicle, consider whether other options will improve your situation or not.
a) Refinance car loan
Working with the lender to check whether you can refinance your car loan or not. You can try to reduce the amount of monthly payment to a lower amount by renegotiating terms and getting an extended repayment schedule as well as low-interest rate. Always keep in mind that the longer the loan term you the more you will pay for interest within that period of time.
b) Sell your car
You may sell your car and repay your remaining loan. After repaying the loan, you may look for an affordable vehicle.
c) Contact the lender
Try to convince your lender and make them appreciate your financial situation showing your problems to make loan payments. By using this method, your lenders can help you change terms on the loan and make it affordable for you. Lenders can also help you delay payment and also change the payment schedule.
How you can keep your car?
When you faced a Repossession, there are many ways out. You can easily keep your if you reinstate the loan or redeem your vehicle. You can also prevent repo by filing for bankruptcy and getting protection.
You may also keep your vehicle by focusing on these steps:
- Work on your finances. Create a budget to ensure that you are going to maximize monthly loan payments every month.
- Properly review your spending and have a look at areas that you can cut to make your finances afford your car payments.
- Search for a part-time job. It will help you to save more money as well as prevent your credit history from getting damage which comes from the Voluntary Repo.
In case, you are not able to keep the vehicle, then consider selling it and use the selling money to pay the car loan.
Voluntary Repo should be the last and best option. In short, you first call your lender and explain each detail of your situation. Chances are better if your lender has a history of helping other borrowers in this situation previously.
If you are not able to arrive at a solution with the lender and use all of the options mentioned above, then it is a better option to consider voluntary repo. It will help you avoid all kinds of stress which can come with a regular repo. But it may have some negative impact on your credit history. So, never take it lightly. When you are going to purchase the vehicle, consider your finances and make rational decisions when you purchase a vehicle. The best method is to buy what you can afford. Paying cash amount will eliminate all kinds of worry related to the payment of monthly loan bills.
So, we conclude that going through vehicle repossession is not so easy. The best way to prevent it from happening is simply to talk with the lender. So, try to get immediate assistance so that you may not get any problems in the future. Hope this article gives you plenty of information about repossession. If you need more details, then let us know. We are always there to help you in any situation.