7
What is Voluntary Repossession?
Voluntary Repossession: What It Is and How It Works
If making your car payments has become unmanageable, voluntary surrender may be a better alternative to having the car involuntarily repossessed. It's a difficult choice, but options are available to support your decision.
How does voluntary repossession work?
Voluntarily surrendering a car involves informing your lender that you can no longer make payments and intend to return it. The creditor will resell the vehicle, and you’ll receive a statement with the details of the sale.You will have to pay the difference between what the car sold for and what you owed on the loan, or the “deficiency balance.” For example, if you owe $10,000 on your car and the lender sells it for $7,000, you must pay the $3,000 difference. The creditor will resell the vehicle, and you’ll receive a statement with the details of the sale.
You will have to pay the difference between what the car sold for and what you owed on the loan, or the “deficiency balance.” For example, if you owe $10,000 on your car and the lender sells it for $7,000, you must pay the $3,000 difference. The creditor will resell the vehicle, and you’ll receive a statement with the details of the sale.
You will have to pay the difference between what the car sold for and what you owed on the loan, or the “deficiency balance.” For example, if you owe $10,000 on your car and the lender sells it for $7,000, you must pay the $3,000 difference. You also might still have to pay fees associated with the car loan, such as late payment charges. Once you're ready, empty your car of all personal items and arrange the time and place to drop off your car and hand over the keys. Keep records of when, where and with whom you dropped your car off in case your lender asks for these details.
Pros and cons of voluntary repossession
Pros
May avoid some fees tied to involuntary surrender, such as towing and storage costs.
Shows the lender you took a proactive approach, which could reflect more positively in the future.
Gives you more control over how and when you return the vehicle.
Cons
Remains on your credit reports for up to seven years as a derogatory mark.
You may still owe a deficiency balance if the car sells for less than what you owed.
If unpaid, the deficiency balance could be sent to collections, causing further credit damage.
Does voluntary repossession hurt your credit?
Yes. Both voluntary surrender and involuntary repossession pose harm to your credit score, but the former may give you more control of your situation. Voluntary surrender counts as a derogatory or negative mark and will stay on your credit reports for up to seven years. This stain on your credit reports might prevent you from being approved for new credit and your terms, like interest rates, will probably be higher. When it comes to your credit score, repossession of any kind is detrimental — but exactly how dramatic depends on the state of your credit. The higher your score, the bigger drop you’re likely to see.Voluntary repossession: What Redditors say
We sifted through Reddit to get a pulse check on how users feel about voluntary repossession. We used an AI tool to help analyze the feedback. People post anonymously, so we cannot confirm their individual experiences or circumstances. We sifted through Reddit to get a pulse check on how users feel about voluntary repossession We used an AI tool to help analyze the feedback. People post anonymously, so we cannot confirm their individual experiences or circumstances. Most users describe voluntary repossession as a last resort. Redditors say that a voluntary surrender looks no different than an involuntary repossession on your credit reports and to lenders. It can tank your score by 100 points or more, which is a big challenge to overcome. It does give you a bit more control over the process, some posters say, and helps avoid some of the fees associated with a “repo man.” Selling your car privately or to a dealer could be far less damaging than a repossession, according to some Reddit users. Even if you have to take out a personal loan to cover the difference between what the car sells for and what you owe on the loan, you’re avoiding the credit damage.Meet MoneyNerd, your weekly news decoder
So much news. So little time. NerdWallet's new weekly newsletter makes sense of the headlines that affect your wallet.So much news. So little time. NerdWallet's new weekly newsletter makes sense of the headlines that affect your wallet.
So much news. So little time. NerdWallet's new weekly newsletter makes sense of the headlines that affect your wallet.
How to avoid voluntary repossession
If you're struggling to make your car payments, there may be alternatives to voluntary repossession:Talk to your lender
Check to see whether you qualify for options that would allow you to keep your car, like a repayment plan or more time to make a payment. Ideally, you’d do this before you fall behind on payments.See if you qualify for relief
Job loss, divorce, a medical emergency and other types of financial burdens could qualify you for an auto loan hardship program. Not all lenders offer them, but it’s worth looking into. » MORE: Auto-loan debt relief options » MORE:Transfer your car loan payments
It may be possible to have someone else you trust, like a parent, assume responsibility for your car by transferring the loan to them. This way, you can still use the car and pay the person back over time. Contact your lender first to see if this approach is allowed.Refinance your car loan
If you have good credit, you may be able to refinance your car loan to lower the interest rate. This could reduce payments and make them more affordable. You can learn more about how to refinance your car loan using our guide.Sell your car
You might be able to sell your car and get enough to cover your loan in full. You might even have money left to put toward a less expensive car. » MORE: How to sell your car if you still have a loan » MORE:How to rebuild your credit after voluntary repossession
While waiting for a voluntary repossession to age off your credit report, here are some ways to restore your credit: Pay your bills and existing lines of credit on time. Strive to pay more than the minimum payment to avoid accruing debt and paying interest. Pay your bills and existing lines of credit on time. Keep your credit card balances low. When you use 30% or less of your credit limits, that helps keep your credit utilization low, which can elevate your score. Keep your credit card balances low. Consider credit-building alternatives. Sign up for a rent reporting service or a program like Experian Boost, where your on-time utility and streaming service payments might give your credit an extra bump. Consider credit-building alternatives. » MORE: Learn how to build credit with Experian Boost, UltraFICO and eCredable » MORE: Learn how to build credit with Experian Boost, UltraFICO and eCredableCan you get another car after a voluntary repossession?
Yes — but it might be harder, especially at first. A voluntary repossession can lower your credit score, which might mean fewer financing options because many lenders will see you as a high-risk borrower. Give your credit time to rebound and work on building it through on-time payments and paying down existing debt. These habits, done consistently over time, should give you a better chance at another car in the future. » NEXT: 9 ways to build your credit fast » NEXT: 9 ways to build your credit fast » NEXT: 9 ways to build your credit fastMeet MoneyNerd, your weekly news decoder
So much news. So little time. NerdWallet's new weekly newsletter makes sense of the headlines that affect your wallet.So much news. So little time. NerdWallet's new weekly newsletter makes sense of the headlines that affect your wallet.
So much news. So little time. NerdWallet's new weekly newsletter makes sense of the headlines that affect your wallet.
Explore more on Article sources NerdWallet writers are subject matter authorities who use primary, trustworthy sources to inform their work, including peer-reviewed studies, government websites, academic research and interviews with industry experts. All content is fact-checked for accuracy, timeliness and relevance. You can learn more about NerdWallet's high standards for journalism by reading our editorial guidelines. Equifax. Auto Insights for 2026: The State of the Auto Industry and Key Trends to Watch. Accessed Apr 23, 2026. About the authors Barroso Amanda Barroso, Ph.D., is a writer and content strategist helping consumers navigate budgeting, credit building and credit scoring. Before joining NerdWallet, Amanda wrote about demographic trends at the Pew Research Center and earned a Ph.D. from The Ohio State University. Her work has been featured by the Associated Press, Washington Post and Yahoo Finance. Published in Pyles Sean Pyles, CFP®, is producer and host of NerdWallet's "Smart Money" podcast. On "Smart Money," Sean talks with Nerds across the NerdWallet Content team to answer listeners' personal finance questions. With a focus on thoughtful and actionable money advice, Sean provides real-world guidance that can help consumers better their financial lives. Beyond answering listeners' money questions on "Smart Money," Sean also interviews guests outside of NerdWallet and produces special segments to explore topics like the racial wealth gap, how to start investing and the history of student loans. Before Sean started podcasting at NerdWallet, he covered topics related to consumer debt. His work has appeared in USA Today, The New York Times and elsewhere. When he's not writing about personal finance, Sean can be found tending to his garden, going for runs and taking his dog for long walks. He is based in Portland, Oregon. Published in How does voluntary repossession work? Pros and cons of voluntary repossession Does voluntary repossession hurt your credit? Voluntary repossession: What Redditors say How to avoid voluntary repossession How to avoid voluntary repossession How to rebuild your credit after voluntary repossession Can you get another car after a voluntary repossession? Car Repossession: Know Your Rights and What to Do 7 Ways to Rebuild Credit Got debt? How making a partial payment can hurt your credit score 7 Ways to Rebuild Credit By Bev O'Shea, Amanda Barroso, Lauren Schwahn How to Build Credit From Scratch at Any Age By Amanda Barroso Credit Score Ranges: What They Mean and How They Work By Amanda Barroso, Lauren Schwahn How to Calculate Your Credit Utilization Ratio By Amanda Barroso What Is a Good Credit Score and How Do I Get One? By Amanda Barroso, Lauren Schwahn