Bills.com co-CEO, Brad Stroh discusses what you need to know about voluntary repossession and deficiency balances.
In this video, Bills.com expert Anthony Garcia explains what a voluntary repossession is, and more specifically, what are deficiency balances? Bills.com is your one stop online resource for finding great article, informative videos, and interactive tools to help you find, learn, and save.
"Hi, I’m Anthony Garcia with Bills.com, have you fallen on hard times, and can no longer afford to make the loan payments for your automobile? You might want to consider a Voluntarily Repossessing for your car loan instead of waiting for it to be forcefully repossessed. "Voluntary repossession" is a term used to describe a situation in which a consumer voluntarily surrenders property to the lender that financed the purchase. This generally occurs when a consumer has fallen behind on his or her loan payments, and decides to surrender the property rather than forcing the creditor to proceed with a repossession. This property could include cars, boats and even homes. Basically any large ticket item that requires taking out a loan.
Both a voluntary repossession and a standard repossession have the same effect on your credit rating. They will both appear as repossessions, and will both result in a significant negative mark on your credit history. Repossessions will appear on a credit report for 7 and a half years from the date of first delinquency. You will likely see your credit score drop substantially. That being said, the primary benefit of a voluntary repossession is that the costs associated with the process tend to be significantly less than those associated with a forced repossession, which could save you a lot of money as you work to pay off the remaining balance of the debt.
Even if you surrender your vehicle to your lender voluntarily, the lender retains the legal right to collect on any balance remaining on the debt after the car is sold at auction. This type of debt is referred to as a "deficiency balance." The creditor may even file a lawsuit against you to collect on the unpaid deficiency balance. You should therefore only proceed with a voluntary repossession if you truly cannot afford the loan, as you will likely still owe the lender a significant amount of money, even after you no longer have the use and benefit of the property. You may also try to negotiate a settlement on the deficiency balance with your lender or use a reputable debt settlement firm for assistance. I wish you the best of luck in resolving your financial difficulties, and I hope this information helps you Find. Learn & Save. Thanks for watching us here at Bills.com, where we’re helping people save money everyday."