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

NOV 08, 2011

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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 wont ruin your credit.

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 cant 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 wont 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 wont 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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This article is provided for general guidance and information. It is not intended as, nor should it be construed to be, legal, financial or other professional advice. Please consult with your attorney or financial advisor to discuss any legal or financial issues involved with credit decisions.

Published by permission from ConsumerInfo.com, Inc., an Experian company. © 2015 ConsumerInfo.com, Inc. All rights reserved.