What Is A Voluntary Surrender

What Is A Voluntary Surrender?

A voluntary surrender is when you decide to return your car to the lender because you can no longer afford the payments. It’s basically giving up the car before the lender has to repossess it. Here’s a quick rundown of what you need to know:

Voluntary Surrender vs. Repossession

With a voluntary surrender, you contact the lender and arrange to return the car on your own terms. With repossession, the lender sends someone to take the car back without your consent. Both hurt your credit, but voluntary surrender shows you’re trying to work with the lender so it may have a slightly less negative impact.

Pros of Voluntary Surrender

• Avoids repossession fees like towing and storage costs
• Lets you choose when and where to return the car
• Shows willingness to communicate and cooperate with lender
• May have slightly less impact on credit than repossession

Cons of Voluntary Surrender

• You still lose the car
• Your credit takes a serious hit either way
• You may still owe money after the car is sold
• Getting a car loan in the future will be very difficult and expensive

What Happens When You Voluntarily Surrender

1. Contact the lender – Let them know you can no longer afford payments and arrange a time to return the car.
2. Return the car – Drop it off at the agreed upon time and location. Get documentation of the surrender.
3. The car is sold – The lender sells the car and applies the money towards your remaining loan balance.
4. You may owe money – If the car sells for less than you owe, you’re responsible for the difference.
5. It’s reported on your credit – The voluntary surrender and any missed payments will show on your credit report.

Alternatives to Consider First

Before choosing voluntary surrender, see if you qualify for any options to keep the car, like:

• Refinancing the loan for lower payments
• Payment extensions or deferments
• Adding missed payments to the end of the loan term
• Agreeing to a modified repayment plan

You may also consider selling the car yourself and using the money to pay down the loan. This avoids the credit damage of voluntary surrender.

How to Rebuild Your Credit After Voluntary Surrender

Recovering from a voluntary surrender takes time. Here are some tips:

• Continue making payments on other accounts on time.
• Pay down balances on revolving credit accounts.
• Avoid applying for new credit right away.
• Check credit reports for errors and dispute any inaccuracies.
• Sign up for credit monitoring to stay on top of your credit.
• Consider adding your rent/utility payments to your credit reports.

With good credit habits, your scores can gradually improve over time. But it may take years before you can get approved for prime-rate auto financing again.

The Emotional Side of Voluntary Surrender

Beyond the financial implications, voluntarily surrendering your car can be emotionally difficult. Here are some tips to cope:

• Let yourself grieve – It’s normal to feel sad about losing your car. Give yourself time to process the emotions.
• Separate your identity from the car – Your worth isn’t defined by what you drive. Remind yourself this doesn’t define you.
• Find support – Talk to understanding friends or family about what you’re going through.
• Focus on the positives – You took control of a difficult situation and avoided repossession.
• Make a budget – Review your finances and look for areas to save money going forward.
• Set new goals – Decide what you want next – like rebuilding savings or buying a used car.

While voluntary surrender is discouraging, look at it as a chance to reset your financial goals. With time and perseverance, you can repair the damage and get back on track.

Key Takeaways

• Voluntary surrender means returning the car to the lender when you can’t afford the payments.
• It damages your credit but may be slightly better than repossession.
• Consider all alternatives before choosing voluntary surrender.
• Rebuilding credit after voluntary surrender takes diligence and patience over time.
• Focus on the positives – you took control of a difficult situation.

Voluntary surrender should be a last resort. But if you exhaust all options, it can be the responsible approach when keeping the car is impossible. While the credit impact is severe, voluntary surrender gives you a chance to start fresh and rebuild your finances.