The simple answer is yes, a voluntary repossession affects your credit score. Even if a borrower does give up their vehicle voluntarily, their credit score still takes a hit.
What Happens When You Surrender Your Car?
When someone is faced with repossession, they can either wait for the repo man to come take their vehicle on behalf of their lender or turn it in themselves. Regardless of whether or not the borrower does a voluntary repossession, here are three things that’ll happen after repossession:
- Credit is affected – Two things go on a person’s credit report: the late payment(s) and the repossession, itself. Just how big of a hit their credit score takes depends on their credit history and current information on their reports. Be aware that the information stays on a borrower’s credit reports for up to seven years.
- Voluntary repo won’t cancel out a loan – Just because someone gives up their car voluntarily doesn’t mean their loan is closed. Following the repossession, the lender sends the vehicle to an auction where it’s sold to help pay the loan balance. Following the sale, any remaining balance is the responsibility of the borrower – referred to as a deficiency balance.
- It’s difficult to get another auto loan – Someone with a recent repo on their credit reports won’t be able to take out a new loan through a subprime lender for at least a year. The good news is that the borrower can purchase a vehicle through a buy here pay here lot. The bad news is that selection at these lots is typically limited, and the quality of these vehicles isn’t always the best.
The only difference when someone voluntarily gives up their vehicle is that they avoid paying any repossession and towing fees.
Know Where to Turn
If you’ve been without a vehicle for some time and need a loan, but aren’t sure where to turn, let CarsDirect help. With our extensive network of new and used car dealers, we can help you find the financing you need. The dealerships in our network specialize in helping consumers in challenging credit situations. Our safe and secure auto loan request form can help you get started today.