Life is not always a ride on a merry-go-round. You often find yourself on see-saw, going up and down. This holds good for your finances too. When your monetary position has touched its lows and you are unable to pay back secured loans, voluntary repossession might cross your mind.
What is voluntary repossession?
Voluntary repossession is a term used to explain the circumstances in which borrower voluntarily hands over the purchased items securing a loan like automobiles, house, furniture to the lender. It is a situation where a borrower can no longer meet the loan obligation and decides to return the purchased items rather than waiting for the creditor to seize the property
Steps involved in voluntary repossession
Non voluntary repossession or voluntary repossession
Repossession by the finance company involves forcibly taking the defaulted asset from your possession. The services of this repossession is charged to you. Voluntary repossession affects your credit score but it is better than repossession by the company. Voluntary repossession is relatively better as both borrower and lender have talked it over and are in sync with each other and the borrower need not wake up to a rude shock of confiscation of his property.
It shows your willingness to accept your circumstance and work with your creditors. Except for these reason,s borrower does not benefit in terms of cost (e.g. auction fees) or credit score.
Repossession whether it is regular or voluntary reflects in credit report and lowers the ability of rating loans in future. If you are smart enough, negotiate with your lender not to report the repossession to the credit agencies. It is hard to part with your prized possessions but if that is the only option left, why not do it gracefully?