What You Need to Know About Voluntary Repossession

Ignacio Kunze
Published Aug 2, 2025


Have you fallen behind on your car loan payments? Returning your car to your lender, a process known as voluntary repossession, might seem like a solution. 

However, it's important to know that doing so can hurt your credit score and you might still owe money on your car loan afterward. Before making this decision, consider other options like selling your car or negotiating with your lender.


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What is Voluntary Repossession?


Voluntary repossession, also called voluntary surrender, happens when you can no longer afford your car payments and decide to return the vehicle to the lender on your own. 

This is different from involuntary repossession, where the lender takes back the vehicle without your agreement once you default on the loan.
 

How Does it Work?


If you choose this route, you should inform your lender that you can't continue to make payments and wish to return the car. You’ll arrange a time and place to hand over the vehicle and the keys. 

Make sure to note the details about the drop-off, as this information could be useful if there are any questions later.
 

Financial Impact


Voluntary repossession means you might still owe money even after the car is returned. The lender will likely sell the vehicle, but if the sale doesn't cover the full amount of the loan, you will be responsible for paying the difference, plus any additional fees like late-payment charges. 

If you can't pay, your account might be sent to a collection agency, which will negatively affect your credit report. This action, along with any related lawsuits, can stay on your credit report for up to seven years, potentially making it harder and more expensive to get loans in the future.
 

Consider These Alternatives First

 
  • Talk to Your Lender: Your lender may agree to adjust your loan terms to make payments more manageable.
  • Refinance Your Car Loan: If you can get a lower interest rate or a longer repayment term by refinancing, your monthly payments could become more affordable. However, this could mean paying more interest over time.
  • Sell the Vehicle Yourself: If your car is worth more than the balance of your loan, selling it yourself might be a good option. Use resources like Kelley Blue Book to find the right selling price.
 

Conclusion


Voluntary repossession should be a last resort. Always contact your lender first to discuss all available options. They may have solutions to help you keep your vehicle and avoid the negative impacts on your credit. 

Check Out: Understanding Auto Loan Relief: A Comprehensive Guide

If you end up needing another car in the future, consider more budget-friendly options like buying a less expensive or used car, or even paying in cash to avoid new loan commitments.

Remember, this decision shouldn't be taken lightly due to its long-lasting impact on your financial health.

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