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If you fall behind on your car payments and cannot catch up, you can give your car back to your lender. Lenders call this voluntary repossession, and it can potentially give you some financial breathing room. But before you turn your car over to the bank, you need to consider all the potential consequences. To learn more about voluntary repossession in Florida, contact a skilled car repossession lawyer at Loan Lawyers today.
Can Voluntary Repossession Have an Impact on Your Credit?
One reason many people consider voluntary repossession is to protect their credit score. Unfortunately, giving your car to your lender is unlikely to protect your credit. Many lenders consider a voluntary repossession the same as an involuntary repossession, leading to a negative mark on your credit report.
How Much Does a Voluntary Repossession Affect Your Credit?
Estimates vary, but you can expect a voluntary repossession to lower your credit score by 50-150 points. How big of a drop you will see depends on factors such as your prior credit history and how many payments you made before the repossession. A large drop in your credit score can severely impact your ability to obtain future loans for a car, home, or other large purchases. Some lenders may not give you credit after your score drops, or you may have to accept a loan with a high interest rate.
How Long Does a Voluntary Repossession Stay On Your Credit?
According to Experian, one of the three main credit reporting agencies, a voluntary repossession is considered a loan default. Loan defaults lead to derogatory marks on your credit report that can last up to seven years. You may be able to remove a derogatory mark from your credit report by paying the balance you still owe on your loan or working out an arrangement with your lender.
Pros and Cons of Voluntary Repossession
There are pros and cons to surrendering your car to your lender if you fall behind on your payments. The benefits of voluntary repossession include the following:
- A better repossession experience — Involuntary repossessions upset many people because they often happen at inconvenient times. A voluntary repossession allows you to choose when you turn over your car, giving you time to make plans.
- Lower repossession expenses — If a lender repossesses your car, you may owe additional fees on top of your loan balance. Voluntarily turning over your car means you do not have to pay repossession costs.
- Less stress on you — For better or worse, turning over your car to your lender means you do not have to worry about the car any longer. You may still owe a balance and have other problems to worry about. But you do not have to worry about maintaining your car or when the bank will take it.
Some negative effects of voluntary repossession of a car include the following:
- Lower credit score — You will likely see your credit score drop after you give your car to your lender, which could impact your financial future.
- You may still owe a balance on your loan — You might need to pay back your lender even after giving them your car, though typically just the remaining balance not covered by the car’s resale. An outstanding loan balance can cause significant financial stress.
- You no longer have your car — You may have ways to get where you need to go after surrendering your car. But these options will likely be less convenient than driving yourself.
Talk to an Experienced Car Repossession Lawyer in Florida Today
The Florida foreclosure defense lawyer, debt defense lawyer, and Florida bankruptcy attorneys at Loan Lawyers can help you decide whether to voluntarily repossess your car. We will protect your rights and help you find the best way forward from this challenging situation. Call us today or visit our contact page for a free consultation.
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Loan Lawyers is made up of experienced consumer rights attorneys who use every available resource to develop comprehensive debt solution strategies. Our goal is to take on those burdens, resolve those problems, and allow our clients to sleep soundly knowing they are on the path to a better future.
