Consumers will sometimes find themselves unable to keep up with their loan payments on their cars, trucks, boats, motorcycles, RV's, etc. What they should know is that voluntary repossession is a viable option to them and most importantly, it could prove to be much less costly than repossession. It can also help them to get their life and their finances back on track sooner than later.
What is a Voluntary Repossession?
Voluntary repossession is a means of voluntarily surrendering the vehicle and returning it back to the financial institution that financed it, before they are forced to start repossession procedures. Working hand in hand with their collections department is crucial in doing this successfully. Explain to them, in writing, why it’s no longer affordable. This is called a hardship letter. They should give the borrower a safe location to drop off the vehicle and meet with the borrower to discuss further procedures.
How Does a Voluntary Repossession Save Money?
At the point in which the vehicle is voluntarily returned to the bank, the consumer should only be responsible for the outstanding loan balance. When the problem goes ignored and the vehicle becomes forcefully repossessed, thousands of dollars in fees will be added to the outstanding loan balance that the owner will now be held responsible for. They include fees such as lawyer fees, repo man fees, towing fees, storage fees, detailing fees, document fees, administrative fees, etc. The list of fees will seem endless. They are very costly and will add up really quickly.
Try Selling First.
The best thing the owner can do is to try and sell it on their own first, because they will most likely get more money for it then the financial institution will. Whether the goal is to just get rid of the vehicle or sell it and downsize to something more affordable, websites like eBay motors, craigslist, autotrader, vehix, and cars.com make it easy for consumers to market their own merchandise. Listing it on all five sites at once will maximize its exposure and can help to find a buyer.
The Lenders’ Options
The lender may be able to refinance the loan in order to make the payments more affordable, thus allowing the owner to keep their vehicle. If this is not an option and the lender takes possession of the vehicle, they will then need to sell it. If it sells for more than what’s owed, the lender should credit the original owner any excess cash. On the other hand, if any balance remains after it sells, the lender will hold the owner responsible for paying the deficiency balance in full or in installments.
While a voluntary repo may be beneficial in some aspects, it will still damage the credit report in the same way as a forced repo or collection account. However, while no other banks may want to finance the next vehicle with a repo on the credit report, the same bank that worked out the voluntary repo may be willing to provide financing since they weren’t left hanging. This also provides the bank a chance to roll in the financing of any deficiency balance that may be owed from the sale of the repossessed vehicle.
Needless to say, it’s probably a better idea to turn over the keys a few months earlier, save some cash in the long run, and start building credit again as soon as possible. As a last note, even if the bank has the vehicle up for sale, it’s still a good idea for the original owner to try to find a buyer for the vehicle because the sooner it sells the better. As mentioned above, the seller may be able to get more money for it than the bank can. This will leave less of a deficiency balance, and once it sells they can begin building credit and can likely finance their next vehicle.
If this situation sounds all to familiar, check out this article and read about how much money can be saved by buying used cars instead of new cars. Save $100,000 on Cars.
Real Estate can also be repossessed. Click Here to Read about Foreclosures