What Happens After Voluntary Repossession on a Vehicle?

Sometimes you have to face the fact that you must turn your automobile in because you cannot afford to make the payments. This is considered a voluntary repossession, and there is little difference from an involuntary repossession. A voluntary repossession allows you to save money in repossession fees because the lender does not have to hire a repossession company to repossess your car. Any fees incurred are passed on to the borrower.

Auction

If you voluntarily turn your car in, the lender will sell the car at an auction to the highest bidder. There could be a deficiency balance that you could be responsible for depending upon the state you live in. If you are responsible for the balance, the lender could get a judgment and pursue you with collection activities until the balance is paid. The collection activities can vary from state to state, but some of the activities that can be implemented include placing a lien on your property or even garnishing your wages.

Notification

The lender has to notify you when they are going to sell the vehicle. This gives you the opportunity to get the money needed to bring the account current and pay the fees if you happen to come into a large sum of money. The lender may reinstate your loan so that you can continue to make monthly payments. This is really taking it to the limit.

Pay Arrangements

After you are notified of the deficiency balance call the lender and make arrangements to pay. Sometimes you can negotiate for a payment that fits into your budget. You don't want to be forced to pay a larger payment than you can afford. Lenders will more likely want to work with you and accept your payment arrangements.

Credit Report

A repossession will show up on your credit file for approximately seven years from the day your account first became delinquent, not from the date of the repossession. This will lower your credit score, and your credit card companies will lower your credit limits and possibly close your accounts. Either one of these actions will also decrease your credit score. A lower credit score will increase the price you pay for other credit products, such as mortgage loans and automobile loans. You can identify a repossession on your credit file based on the credit rating. The rating will appear as an I-8. The "I" stands for installment, and the "8" stands for repossession.

Auto Loan

If you need to get another automobile, you may have to apply for a loan with a bad-credit lender, in which case the interest rate will be higher than normal and you could incur fees. There are companies that specialize in this type of lending. Later on, you may be able to refinance your car loan to get a lower rate. It is also important to keep paying your other creditors on time because this will have a favorable impact on your credit file and increase your credit score, which ultimately helps you recover from the repossession faster.