What is Voluntary Vehicle Surrender and How Does it Impact Credit?

From loan payments to pricey gas and high insurance costs, the expenses of owning a car can really add up. When you find yourself in the unhappy situation of not being able to afford your car anymore, you can find yourself desperate for options that won’t ruin your credit.

Woman signing check book at desk.

Contact the lender to find out how to go about voluntary vehicle surrender.

Allowing the vehicle to be repossessed will spell big trouble for your credit score. An auto repossession can stay on your credit report for up to seven years, although its impact on your score will lessen over time. You might have heard of another option called voluntary vehicle surrender.

Simply put, when you voluntarily surrender a vehicle, you acknowledge that you can’t afford to repay your auto loan and you turn possession of the vehicle over to the lien-holder. Like any other time when you fail to pay a debt in full, voluntary vehicle surrender will negatively impact your credit score, just like repossession would.

Voluntarily surrendering a vehicle, however, is a lot different emotionally than allowing your car to be repossessed. If the bank decides to repossess your car, it will send an agent to retrieve it. He or she might show up at your house in the middle of the night to remove the vehicle. Or worse, the repossession could happen in front of family, friends or co-workers.

When you voluntarily surrender a vehicle, you’re returning it on more positive terms. Granted, the lender still won’t be happy, but you’ll avoid the embarrassment and trauma of repossession. And if your credit report is being reviewed by a human at some point – say a potential employer or landlord – a voluntary surrender might be perceived as a more responsible decision than repossession.

If you have to voluntarily surrender your vehicle, contact the lender to find out how to go about it. Make sure you understand all the terms of the surrender and what, if any, amount you may still owe after returning the vehicle.

Voluntary repossession won’t save your credit score from the negative impact of defaulting on a loan. But it could preserve your peace of mind and help you avoid the drama of repossession.

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