1. Contact the Lender: The borrower contacts the lender and expresses their inability to continue making payments. They inform the lender of their intention to voluntarily surrender the vehicle.
2. Arrange the Repossession: The lender may schedule a convenient time for the borrower to return the vehicle or ask the borrower to leave it at a designated location.
3. Return the Vehicle: The borrower returns the vehicle to the lender along with all sets of keys, registration documents, and any other required paperwork.
4. Assess the Vehicle's Condition: The lender inspects the vehicle to determine its condition and identifies any damages beyond normal wear and tear. The borrower may be held liable for any excessive damage.
5. Sell the Vehicle: The lender takes possession of the vehicle and attempts to sell it through an auction or private sale to recover the remaining balance of the loan.
6. Calculate Deficiency or Surplus: After the sale of the vehicle, the lender calculates the difference between the proceeds from the sale and the outstanding loan balance.
- Deficiency: If the sale proceeds fall short of the loan amount, the lender can pursue legal action to recover the deficiency from the borrower.
- Surplus: If the sale proceeds exceed the loan balance, the lender returns the surplus amount to the borrower.
7. Notify the Borrower: The lender informs the borrower of the outcome of the vehicle sale, including the sale price, any deficiency amount, or surplus amount.
8. Impact on Credit: Voluntary repossession negatively affects the borrower's credit score because it reflects as a default on the loan. Rebuilding credit might take time and effort, and it may impact the borrower's ability to secure future loans or credit.
It's important for borrowers to communicate openly with their lenders if they face financial difficulties to explore alternative options before reaching the point of voluntary repossession. Lenders may offer payment plans, loan modifications, or other solutions to help borrowers avoid default.
