The short answer is yes. A voluntary repossession will hurt your credit score by lowering it and will remain on your credit report for seven years. However, it is worth noting that a voluntary repossession could hurt your credit report and score less than an involuntary repossession.

So much stigma is attached to repossessions and not making loan payments, even when it is beyond your control. We know it’s something no one ever wants to deal with. It can be depressing, distressing, and demoralizing when you can’t make the payments on something as important as your primary means of transportation. We get it.

Repossession isn’t fun for anyone involved, including us. In an ideal world, repossession companies like ours wouldn’t be needed, but some people fall on difficult times and can no longer stay current on their loan payments so there has to be a remedy. Unfortunately, the remedy is usually repossession.

That is why we want to shine a light on this subject and show why it is essential to keep up with your loan payments and, if you can’t, why you should speak to your lender before it is too late to come up with an agreed plan of action that doesn’t involve involuntary repossession.

We also want to show that while a voluntary repossession will hurt your credit, it is not the end of the world.

Voluntary Repossession is Better than Involuntary Repossession

So, yes, a voluntary repossession will still look bad on your credit report and is a sign that you’ve been having financial difficulties. However, it may not be quite as bad as if your vehicle was being involuntary repossessed. When you voluntarily surrender your vehicle, you show your lender that you are responsible for your debts and are willing to work with them to resolve the situation.

Some lenders, though not all of them, may take a gentler approach with you because you are willingly surrendering your vehicle without any fuss.

Another way you could benefit from opting for a voluntary surrender is by saving money on any added fees that may be passed on to you if the lender had to involuntary repossess your vehicle.

Things to Remember Before Considering a Voluntary Repossession

Make sure you fully understand the exact terms and conditions of the voluntary surrender before you agree to one. Generally, in this situation, the lender will resell your vehicle, and then the proceeds from that sale will cover the balance owed on your loan. You will be expected to pay any balance that remains after the sale of the vehicle, and if you don’t, it may be handed to a collections agency where ultimately your wages may be garnished if you don’t pay.

If the remaining balance after the sale of the vehicle is forgiven, however, it may be reported as additional income, which you’ll have to pay taxes on. Again, that is why it’s so important to work with your lender to fully understand all the terms and conditions of the voluntary repossession before you agree to move forward with one.

Summary on Voluntary Repossessions and Your Credit

With all this in mind, staying on top of your loan payments is essential to avoid any kind of repossession. If you’re having difficulties making payments, you should always speak to your lender sooner than later to see if something can be worked out before a repossession company like ours has to come and collect your vehicle. And if in the end a repossession can’t be avoided, then consider a voluntary repossession as likely your best option to keep the inevitable hit to your credit and credit score to a minimum.