Voluntary Repossession And Credit

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A consumer should think hard and long before using a voluntary repossession for homes or cars to help straighten out their finances. A voluntary repossession by the debtor can result in having to still be obligated to pay the deficiency balance and a getting a bad credit rating.


When using a voluntary repossession, the lender will sell the property at auction and the proceeds will be applied to the balance of your mortgage or auto loan and the fees that will be involved. You will be informed of the balance and that you are still responsible for paying it off, if the balance is not paid off. If there is money left over after the all fees and loan balance is paid, do not expect to get any of the profit as the company can legally keep it. The deficiency balance is the difference between what your creditor receives from selling the vehicle and what you owe on your loan. Creditors will still be allowed to sue you for a deficiency judgment to collect the remaining deficiency balance or loan balance.

A voluntary repossession can result in getting a bad credit rating and make it more difficult to obtain loans in the future. The lender can still report the account to the credit agency to reflect the account as a "foreclosure" or "repossession". It can be more favorable for the consumer to talk to the lender if he/she is going to be late or is behind on any upcoming payments. The lender can provide you with other options, such as selling the property yourself to a private party in order to get the most money out of the vehicle or house. Many creditors may also agree to defer or delay payments if they believe you will be able to pay them at a later date.

When it comes to credit and voluntary repossession, a consumer should look into all of the options available to them by contacting the lender immediately. The last thing a creditor wants right now is another repossession or foreclosure on their books.