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Voluntary Vehicle Repossession

Voluntary vehicle repossession results in eliminating the repossession fee, thus reducing the amount of money owed by a delinquent debtor. Read on to know more.
Aparna Iyer
Consumers may buy a car by availing an auto loan, or they may choose to lease the car. People, generally lease, if they feel that the advantages of leasing, outweigh the benefits accrued by buying a car.
Regardless of whether people lease or avail an auto loan, they have certain obligations pertaining to the discharge of lease or loan payments, as the case may be.
In case they are unable to repay their creditors, or their lessors on time, the vehicle can be repossessed by the creditor or the lessor as per the agreement outlined in the contract drawn in conformity with the state vehicle repossession laws.
Some states also allow the vehicle to be repossessed in case the lessee/debtor does not have adequate auto insurance. Moreover, the creditor or the lessor need not get a writ from the court in order to repossess the vehicle or forewarn the debtor.
The creditor may also have the right to sell the car to a third party, commonly known as the assignee, who can repossess the vehicle, failing timely payments.
One should try contacting the creditor or the lessor and express the inability to make regular payments. Negotiating the terms of the payments and preparing a fresh schedule of payments may help averting a possible vehicle repossession.

Understanding the Concept

Sometime, people may voluntarily call up the lender or the lessor and hand over the car on account of the inability to make regular payments. In this case, the repossession is referred to as voluntary vehicle repossession.

Eliminates Repossession Fee

Agreeing to voluntary repossession results in reducing additional expenses, for the lessor or the creditor, since he/she does not have to hire the services of a repossessor. Any fee that is paid by the lender for the purpose of repossession, is passed on to the defaulter in the form of repossession fee.
Voluntary repossession saves the defaulter the burden of paying the repossession fee a small omission that may be appreciated by the consumer/defaulter, whose inability to keep up with regular payments could be the result of strained finances.

Impact on Credit Report, Credit Score, and Credit Rating

Vehicle repossession remains on the credit report for seven years from the day of delinquency. This impacts the credit history adversely, thus lowering the credit scores of the delinquent individual. The result of a poor credit score can be manifold.
A person, whose vehicle has been repossessed, will find it exceedingly difficult to avail loans at a favorable rate of interest. Moreover, credit card companies may reduce the credit limit on the cards and may also charge a higher APR (Annual Percentage Rate) on account of the risk of default.
The credit rating for a consumer ranges from I0 to I9 assuming that the loan is repaid in installments (R0 to R9 for revolving credit). R8 / I8 indicates a situation, where debts are recovered by repossession.
The credit report of a person, whose vehicle has been repossessed, will carry a rating of I8, since the debtor defaulted on loan or lease payments that are repaid in installments, thus resulting in repossession. Voluntary repossession does not eliminate the chances of the creditor mentioning the late payments or the repossession in the credit report.

The Question of Personal Property

The creditor does not possess the right to keep, use, or sell the defaulter's personal property. He must assume responsibility and inform you on account of the property that has been left behind, which you must claim without delay. Your creditor must exercise care when handling the items, so that no form of damage is incurred.
Besides, the creditor must ensure that nobody else, barring the rightful owner, claims the right to the articles found inside the car. However, in an unfortunate case, if the creditor does not account for the missing items previously placed in the car, introducing an attorney into the picture is essential.

Discussion May Help

Discussing with your creditor, your intemperate condition of being unable to make due payments, controls the situation from going out of hand. There have been several cases, where creditors understand the situation and give you the required leverage.
If you share a decent rapport with the creditor, chances are, he may oblige you and let you make payments at a renegotiated date. If you draw a consensus with the creditor about the date on which the payment could be made, document the same. Oral agreements seldom work, and where money matters come to the fore, rely solely on the written word.

Paying the Deficiency

Deficiency is defined as the difference between the amount owed by the consumer and the money obtained by the creditor on selling the repossessed vehicle. The creditor is allowed to sue the consumer to recover the deficiency.
If the selling price of the car exceeds the amount owed by the debtor, the consumer is entitled to the surplus. Again, voluntary repossession cannot prevent the debtor from getting sued.
On the flip side, there may be the case, where the lessor stays pat on the agreement and flatly refuses to change the agreement. Thus, if voluntary repossession it is, you would reduce the expenses of the creditor.
However, bear in mind that even if you voluntarily return the car on the demands of the creditor, stating your inability to pay the required amount, your credit report, still, would feature the repossession element.
Also, it is you, who is responsible for paying the deficiencies, if and when the creditor plans to sell the car at a lower rate than the rate at which it was originally purchased.

Saving the Unnecessary Costs

When you know you have defaulted, it is far better to surrender the vehicle in question, rather than entertain agents to do the job for you. Instead of the lessor sending the agents to fetch the car in case of default, you might as well hand over the keys to the lessor.
Besides, if the agents come into the picture, you are bound to pay a heavy sum to them, as well. Remember that the payments to the agent are solely borne by the defaulter. The lender, as much as you would like to believe, does not pool in to finance the agents' fees.

Reduce Stress

When one knows that one is a defaulter, stress is bound to build up. The lessee is under constant stress, especially if he is unable to pay the demanded sum on time. It can be stressful for the lender as well. Instead of discord, cooperate with the lender, and decide on a specific date on which you would make the stipulated payment.
Much to your surprise, you may find the lender ready to cooperate with you and your inability to repay the sum, provided you respond to their calls and intimate them about the delay before the due date.

Taking Help from a Credit Counselor

If you are unsure about managing debts and making timely payments, have a credit counselor assist you. Approaching a counselor to work out a pattern to facilitate timely payment, thereby also managing debts, will be of significant help.
Besides, credit counselors have their way of finding a leeway between the lessor and the lessee to strike a beneficial deal with lower interest rates. They would also plan for you to pay off your debts in an organized manner.
It is evident that repossession has a number of negative consequences. However, a creditor or a lessor has to abide by the State Laws regarding repossession.
The law may require the creditors/lessors to sell repossessed vehicles and reduce, or eliminate the debts of the consumers. Violation of the laws may render the creditor liable to pay for the distress and the damages caused to the delinquent consumer.