What Happens if I Return My Car to the Lender Before I Finish Paying It Off?

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Dear Experian,

What happens if I return a car to the lender before I finish paying it off? What's the impact?


Dear MTS,

Returning your car to the lender before you are finished paying it off is called a voluntary surrender or voluntary repossession. In terms of your credit, a voluntary surrender is considered derogatory and will have a substantially negative impact on your scores, so it should be a last resort.

Because a voluntary surrender means you worked with the lender to resolve the debt, future lenders may view it a little more favorably than a repossession when they review your credit history. Ideally, though, you should look for ways to avoid having to return your car to the lender.

How to Avoid Voluntary Surrender

If you are struggling to make payments on your car loan and want to avoid the credit harm that typically accompanies a voluntary surrender or repossession, there may be other options.

If you haven't already, the first step is to talk to your lender and ask whether they can work with you. Some lenders are offering payment accommodations due to the COVID-19 pandemic. Explain your circumstances and see whether there are any options you qualify for that would allow you to continue making payments rather than giving the car back.

If continuing to make payments is not feasible, there may still be some other options for you to consider:

  • Sell the vehicle. If your car is worth as much as or close to the balance on your account, selling it could enable you to pay off the loan without taking a hit to your credit. Even if the sale amount doesn't cover the full amount of the loan, you may be able to refinance the remaining balance, making your payments smaller and much more manageable.
  • Allow someone else to take over payments. If your lender allows, you may be able to transfer your loan to someone else who will take possession of the vehicle and assume responsibility for the loan payments. It's always best to contact your lender to discuss your options before falling behind on payments.
  • Refinance the loan. If your current interest rate is on the higher end and your credit is good, refinancing your loan to one with a lower interest rate may reduce your payments enough that you're able to keep your car.

How Can I Rebuild My Credit After a Voluntary Surrender?

You may not be able to avoid voluntarily surrendering your vehicle. If that's the case, then having a voluntary surrender in your credit history will likely impact you for some time. The good news is that you can start rebuilding your credit scores right away. Here are some tips to begin improving your credit:

  • Bring current any other past-due accounts. If you are behind on any other accounts, bringing them current is the first step to rehabilitating your credit scores.
  • Pay off any outstanding debts, such as collections or charge-offs. Even once your vehicle is back with the lender, you still may owe what's called a deficiency balance. Although an account with past-due payment history will still be considered negative, potential lenders may be more willing to extend credit in the future if they see that you've since made good on the debt.
  • Make all your other payments on time. If you have other credit accounts, be sure that all payments on those accounts are made on time, every time. Your recent payment history matters the most. The more time that has passed since any delinquencies were reported, the less impact they will have on your scores, and your more recent positive payment history will be reflected.
  • Sign up for Experian Boost®ø. Experian Boost allows you to get credit for your on-time utility, cellphone and certain streaming service payments (including Netflix®, Hulu™, HBO™ and Disney+™). You can add these payments going back as far as 24 months.
  • Order your Experian credit score. You can get your free credit score from Experian anytime. When you order your score, you will receive a list of the risk factors that are most affecting you, which can help you determine what other changes you can make to improve your credit.

Thanks for asking.

Jennifer White, Consumer Education Specialist