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Voluntary Surrender vs. Repossession

Dear Experian,

If I voluntarily surrender my car to the financial institution carrying the loan, will it make a difference on my credit report? Or, is it a repossession no matter how it is repossessed?


Dear HAN,

Returning the car to the lender will result in the account being reported as a “voluntary surrender” rather than as a “repossession.” However, the difference will likely be minimal in terms of the negative effect on your credit scores.

Whether you return the car yourself or a repossession company is sent to get it, you are not repaying the debt as agreed. In the end, that is what lenders look at and what hurts credit scores.

The benefit to a voluntary surrender is that you are proactively working with your lender to resolve the debt. Although you are returning the car, you are taking responsibility for your financial issues and trying to work with the lender rather than forcing it to take an action nobody wants.

By working with your lender, you are maintaining a more positive relationship. Because you aren’t completely burning that bridge, the lender may be willing to extend credit to you much sooner after your financial challenges are resolved.

However, you must realize that you will be viewed as high risk and will likely pay a much higher interest rate if you can get approved for a new loan at all.

Thanks for asking.
The “Ask Experian” team

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