I have a car I pay $600 per month. If I buy another car with $300 payments and walk away from the $600 one what will it do to my credit?
If you "walk away" from your auto loan, your creditor will repossess the vehicle. When a vehicle is repossessed, the lender will sell the car at auction and apply the sale price at auction to the amount that you still owe on the original car loan. If the auction does not net enough money to cover the full balance of the note, which it rarely does, then the original borrower (you) would owe the difference, called a deficiency balance, to the lender. The creditor can collect on the deficiency balance like any other unsecured debt, up to and including filing a lawsuit against the borrower.
Repossession has a real adverse effect on your credit. You can expect this account to remain on your credit report for seven years from the date of the repossession, so you will probably be dealing with credit problems for some time to come.
You may be able to balance the negative impact of the repossession by keeping all of your other accounts current. However, even if all of your other accounts have a perfect payment history, repossession would still hurt your credit score. Luckily, the more time that passes from the date of the repossession, the less the repo will affect your credit score, so as time passes, you should see your credit score improve.
Even if you surrender your vehicle to your lender voluntarily, the lender has 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.
A deficiency balance is an unsecured debt, which the law treats the same as credit card debt, a payday loan, or medical debt, among other consumer debts. To see your rights and options for resolving the deficiency balance, read the Bills.com Collections Advice resource.
For more information about credit, credit scoring, and credit reports, I encourage you to visit the Bills.com Credit Resources page.