It may be possible to have someone else, like a parent, assume responsibility for your car by transferring the loan to them. In many ways, voluntary surrender and traditional repossession are similar. This can be difficult if your credit score has decreased since you took out the original loan. What Is Chapter 7 Bankruptcy & Should I File? If you roll over your loan repayment multiple times, you may end up paying more in fees than the amount you originally borrowed. Especially if your finances are spinning out of control, your lender might prefer to getsomethingfrom you before you become completely insolvent. Another benefit to voluntarily surrendering your car is that you can drop it off at your convenience. How Long Does a Voluntary Repossession Stay on My Credit Reports? since early in the COVID-19 pandemic, so you may be able to sell your car and get enough to cover your loan in full. A voluntary surrender will stay on your credit report for seven years. The Consumer Financial Protection Bureau found that 1 out of 5 title loan sequences (where the borrower has to roll over the loan into a new loan) results in vehicle repossession. If you have questions about the MLA, you can contact Military OneSource, which can address them. Another possible way to pay off a car title loan is with a credit card cash advance. This compensation may impact how, where, and in what order the products appear on this site. The creditor will resell the vehicle, and youll receive a statement with the details of the sale. Answered in 21 minutes by: Dwayne B., Lawyer 34,391 Satisfied Customers Practicing for over 20 years and handled many cases and trials for consumers. Unfortunately, both are very negative and will have a serious impact on your credit scores. View your cars estimated value, history, recalls and moreall free. Surrendering your vehicle and repossession are very similar in financial terms. Federal Trade Commission Consumer Information. Another benefit to voluntarily surrendering your car is that you can drop it off at your convenience. Ignoring the problem will only make it worse. As a result, youre left with bad credit and no car, and youll probably still owe money. Can I surrender my car without hurting my credit? A voluntary surrender should be considered a last resort. These loans are based on your cars value, not your credit, so you dont need to go through traditional loan approval processes to get one. Chiara King is an attorney located in central Michigan and licensed in both Michigan and Maryland. An applicant can usually simply drive to a store providing title loans and leave with the loan proceeds in 15 to 45 minutes. TitleMax is one of the largest title lending companies in the nation. If you doubt your ability to do so, it is probably best to avoid this type of loan as interest and fees can accrue quickly. Getting a Car Loan with Bills in Collections, Trading in a Car That Has a Lien on the Title, The voluntary surrender is reported on your credit reports as a repossession, voluntary surrender and traditional repossession are similar, A deferment temporarily pauses your loan payments. That will be reflected on your credit report, as well. Cash advances are usually pretty high in interest, and youll probably need to pay a cash advance fee of 5% on top of the interest. Combining direct services and advocacy, were fighting this injustice. There is usually no credit check, but the title loan company must actually see the vehicle in person. The last thing you want is to enter a vicious cycle of borrowing money, incurring high fees, and then having to borrow more money to pay off the initial loan. All information available on our site is available on an "AS-IS" basis. One of the biggest factors to consider when asking the question, does a voluntary surrender hurt your credit? 2023 All rights reserved. You can also free up cash flow every month with smaller payments. If you are unable to keep up with your car payments, it is important to contact the lender as soon as possible. Many lenders are willing to work with borrowers who are struggling to make payments, and may be able to offer alternative payment plans or extended repayment terms. When he's not writing about personal finance, Sean can be found digging around his garden, going for runs and taking his dog for long walks. Your existing lender might be willing to work with you, so its worth trying to negotiate. Do not sell or share my personal information. For example: if your car sells for $5,000, but you owe $8,000 on your loan, you still owe the lender that $3,000 plus additional fees associated with the surrender. There are a few ways to get out of a car loan. If youre struggling to make car payments, you may be wondering if you can surrender your vehicle without hurting your credit score. It controls what they'll do. Compare personal loan offers matched to your credit profile. You could use websites or social media to sell your property, or you could take the more traditional route and have a garage sale or yard sale. For this reason, lenders may consider a voluntary surrender to be slightly less negative than a repossession. If you become unable to pay a car title loan according to the loan agreement, the lender has the right to repossess and sell your vehicle just like a bank would. According to a report from the Federal Reserve Bank of New York, more than 8 million Americans were seriously delinquent on their car loans as of the fourth quarter of 2017. will make the credit damage from the repossession worse. Is a voluntary surrender better than a repo? 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