1. Repossession: In most cases, voluntarily surrendering your car is considered a voluntary repossession. The finance company may take possession of the vehicle without going through the legal process of a traditional repossession. They can then sell the car to recover the outstanding loan balance.
2. Loan Acceleration: The finance company may accelerate your loan, making the entire outstanding balance immediately due and payable. This means you will owe the full amount of the loan, including interest and any late fees, in one lump sum.
3. Collection Action: The finance company may take legal action to collect the remaining debt. This may include sending collection letters, contacting you by phone, and potentially taking legal action to sue you for the outstanding balance.
4. Credit Score Impact: Voluntarily surrendering your car can have negative consequences for your credit score. Repossessions and loan defaults are typically reported to credit bureaus, which can significantly lower your credit score and make it more difficult to obtain future loans or credit.
5. Deficiency Balance: If the sale of the repossessed car does not cover the outstanding loan balance, you may be responsible for the remaining amount, known as a deficiency balance. The finance company may pursue legal action to collect the deficiency balance from you.
6. Future Vehicle Purchases: A voluntary repossession can make it challenging to purchase a vehicle in the future. Many dealerships and lenders may be reluctant to lend to borrowers who have a history of repossessions.
To avoid these negative consequences, it's important to communicate with the finance company if you're having difficulty making your loan payments. They may be willing to work with you to find a solution, such as modifying the loan terms or offering a temporary payment deferral, to prevent a voluntary repossession.
