Waving the White Flag: Should You Allow a Voluntary Repossession?
You’ve probably heard stories where people do drastic things to stay alive, perhaps after getting stuck in the wilderness or disaster zones. Without going into detail, they’re often the last resort for a person who feels like there’s no other option. Debt can make you feel the same way. If you’re overwhelmed by your car payments, it may seem like there’s only one way out – a voluntary repossession. It’s a route you can certainly take, but you need to ask yourself if it’s worth it. Allowing a lender to take your car might seem like a lifeline if you can’t make your payments, but the consequences of a repossession can go far beyond you losing your car.
You arrive home and open the mailbox. There’s a stack of envelopes, and they’re not HST cheques. It might look like this – bill, bill, bill, bill, flyer, bill, collection letter, and maybe if you’re fortunate, a notice to renew a license of some sort. All jokes aside, you might reach a point where you can’t make a car payment with so many other obligations on your plate. It’s just too much to chew on at once. So if you can’t make payments, it would make sense to just let your car go, right? The short answer is no. And there are reasons to make a repo your very last option.
Repo’s Damage Credit – Badly
Is there is a piece of clothing that still has a stain on it despite years of washing? You can probably think of an item like that hanging in your closet right now. Think of a repossession in a similar fashion. When a repossession gets put on record, it stays there for up to seven years. It sits like an unsightly stain, which future lenders will see and take note of. As you could imagine, the resulting drop in your credit score would make it challenging to get approved for loans and other forms of financing in the years to come, even among lenders who cater to people with bad credit. For this reason alone, you should think twice about giving into a voluntary repossession.
Repo’s Aren’t Cheap
Think you’re strapped for cash now? Well, you probably haven’t thought about the price of a car repossession. In fact, it’s an expense that even lenders don’t want to put up with. In addition to your loan payments (they don’t disappear after getting repo’d), you will have to pay repossession fees, towing costs and in some cases, additional fees if a bailiff is involved – all of which amount to the thousands and are unnecessary. Not only will this add to your debts, it will bring you stress and frustration which will only complicate the situation. So if anything, it’s better to deal with loan payments, instead of the added costs of car repossessions.
Repo’s Make Life Inconvenient
Inconvenience is another factor you’ll face when dealing with a repo. Some might reason it’s not a big deal, especially if there are other options such as carpooling or public transit. But what if your workplace is too far to reach by means of public transit? Are you going to splurge on taxi rides? It wouldn’t make much sense. Or what if you’re an individual who needs a vehicle for work? Perhaps you’re in the construction or landscaping business, and are dependent on a work truck. A repossession could be devastating for business, and just throw you into a vicious cycle. So you should see these things as more than just minor inconveniences – they can put your life out of order.
There Are Better Options
What should you do instead of allowing a repossession from taking place voluntarily? Are there any options that would keep you from facing serious credit issues, while giving you a chance to make your car payments? There are indeed some answers.
Alternatives to the Voluntary Repossession
- Re-evaluate your budget – Are there certain lifestyle choices or habits you can put on the backburner for now? It’s not easy making sacrifices, but doing so might open up some hidden cash flow that can go towards your car payments.
- Modify your loan – If possible, negotiate with your lender to see if it’s possible to change the terms of your loan. That could mean an extension, allowing for lower payments. If your credit has been relatively healthy up until now, you might be able to refinance your loan.
- Resell your vehicle – Although not ideal, you can avoid the credit drops associated with repossessions by selling your car. This will allow you to cover some of the amount remaining on the loan. Keep in mind, however, that you’ll have to come up with the rest somehow. Also, you’ll have to decide if this is a good move since you will be out of a car.
Before resorting to a voluntary repossession, you might want to consider speaking to a credit advisor. It’s natural to worry and sometimes assume the worst when you’re in a pit of debt, but a fresh perspective can help you see a way out. That’s where counselling comes in. They can help you take a deeper look at your finances (ie. income, debts), and point out the areas where you can adjust so that your car payments aren’t so difficult. Best of all, these services are often free.
Don’t Surrender Unless Cornered
When you feel buried underneath car payments, getting out may seem impossible. And the only solution may seem like giving into a voluntary repossession. However, it’s a move that sits in the same category as bankruptcy – it should be a final lifeline if all else fails. Credit experts and financial advisors will even recommend that people who decide to take this route, to go in with a plan. After all, your goal should be to immediately restore your credit back to a healthy state. Ultimately, you can probably save yourself a lot more headaches by finding ways to avoid a repossession altogether. The restrictions that come with major credit hikes will be much worse than what you’re probably facing now. So fight hard to keep yourself from sinking further!