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How does a voluntary repossession affect my credit score?
I can't pay my car loan anymore. But instead of making the bank repo the vehicle, I'm going to give them the keys. How will this affect my credit score?
Eric Schad · Updated on
Reviewed by Shannon Martin, Licensed Insurance Agent.
“It depends on whether you’re upside-down on the loan. When you surrender the vehicle, but the vehicle is worth more than the loan balance, you might see a small hit to your credit score, as your obligation to pay has been fulfilled.
In most cases, you can probably get more money by selling it yourself, paying off the loan, and keeping the remaining proceeds.
But if you still have a balance on the loan after the car has been sold, you’re responsible for paying it. In this case, you might be sent to collections, which generally results in about a 100-point drop in your credit score.
Since there’s little difference between a voluntary and involuntary repo, don’t rush to hand the car over. Instead, use the time to try to earn money to pay your delinquent monthly amounts.”
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- Gregory R.
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