Car-Being-RepossessedIf you are facing a forthcoming repossession then you are likely aware that there are going to be serious consequences with regard to your credit reports and scores. In fact when it comes to credit problems, repossessions are among the worst you can experience, ranking among the worst of the worst. A repo can have a severely negative impact on your credit reports and scores, an impact which will have the ability to linger and haunt your credit for many years to come.

Types of Repossessions

There are 2 different types of repossessions that can occur – the voluntary repossession (aka voluntary surrender) and the involuntary repossession. A voluntary repo, as the name suggests, occurs when you opt to voluntarily turn the vehicle back over to the dealership or lender on your own. Involuntary repos occur when the lender hires someone (aka the “repo man”) to locate and pick up the vehicle after you have defaulted on your loan.

Similarities Between Voluntary and Involuntary Repossessions

Many consumers who find themselves in financial trouble mistakenly believe that a voluntary surrender of their vehicle will be less damaging to their credit. These consumers may also believe that a voluntary surrender will be viewed less negatively by future lenders. Unfortunately, that is not the case.

Lenders do not like to see either type of repossession on your credit reports because both types boil down to the same problem – you failed to pay back your auto loan according to the terms of your original agreement. Therefore, since you already broke a loan agreement in the past, statistically there is a high probability that you will not pay back future loans according to terms. As a result, your credit scores will likely suffer if either type of repossession appears on your credit reports.

In addition to the fact that both types of repossessions can cause identical credit score damage, both the voluntary and the involuntary repossession are allowed to remain on your credit reports for the same amount of time. According to the Fair Credit Reporting Act, repossessions are permitted to remain on your credit reports for up to 7 years.

Differences Between Voluntary and Involuntary Repossessions

As mentioned above, there is not much difference between a voluntary repossession and an involuntary repossession from a credit standpoint. However, if there simply is no avoiding repossession then there are a few other differences that may make a voluntary surrender a slightly more appealing choice. First, you might find a voluntary repo to be a less stressful experience than its involuntary counterpart. Personally driving your vehicle to the lender who issued the loan is certainly going to feel like a more dignified way to endure the unpleasant experience of a repossession and, in truth, it probably is much less embarrassing than watching your vehicle get loaded onto the back of a tow truck in front of all of your neighbors.

Another difference between voluntary and involuntary repossessions is the actual cost involved. When you fail to surrender a vehicle back to the lender after you have defaulted on a loan then the lender will eventually hire someone to come pick up the vehicle from you, perhaps in the middle of the night. Naturally, there is a cost associated with hiring someone to repossess your vehicle and that cost would generally be passed on to you and added onto the outstanding amount owed on your credit reports.

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