(Q from Missouri) What is a no charge repossession?
Dear Q:
That’s the first time I’ve heard of it called a no charge repossession. I believe what you are referring to is known as a voluntary repossession.
Voluntary Repossession
When you know that you will not be able to afford your car payments, you begin to make arrangements to do without the vehicle. You may have already removed your valuables from the vehicle in preparation. That car serves as collateral to guarantee the loan, making it the primary source of payment for a defaulted loan.
Sometimes you just bought more than you can afford. Perhaps you lost your job or can no longer earn overtime pay. Either way, when you make the conscious decision that you cannot keep the car, you begin to make arrangements to give it up.
When a repo crew arrives and takes your vehicle, additional charges will be added onto the loan balance. These can include repossession fees, storage fees, legal fees and finally auction fees. All of these fees can easily exceed $1,000. Once the vehicle is sold, you owe the residual loan balance that is still outstanding. This can be substantial, since most vehicles that are repossessed have loans that are upside down.
Through a voluntary repossession, you can turn over the vehicle on your terms. By doing so, you avoid tacking on many of the fees that can inflate the already bloated loan balance. This could be considered a “no charge repossession.”
In terms of credit impact, a voluntary repossession is just as toxic to your credit rating as an involuntary repossession. There is no distinction made on your credit report. The only advantages to voluntary repossession include lower fees and saving yourself the embarrassment of experiencing a repossession at the worst possible moment.
Alternatives to Repossession
Since owners that are facing repossession may be desperate, some might consider contracting with one of the car loan modification services. These companies offer services that are dubious at best. Most are outright scams. They take your money and then offer to negotiate with your lender. However, they enjoy no special relationship with your lender. Most importantly, your lender would rather you save your money and contact them directly to work out alternative arrangements. After all, do they really want your car?
They are lenders, not car dealers. They just want you to make your payments, and they just might make minor changes in your payment plan to help you make those payments. Of course, if you were unfortunate/desperate enough to buy your vehicle from an overpriced buy here/pay here car dealer, then you can assume that you already overpaid for the vehicle and they will repossess it just as quick as they can. Those companies do want your car!
Tags: no charge repossession, voluntary repossession