What will it do to my credit if I let the bank have my new car and stop payments?

Question

i have lost my job due to illness and am medically prohibited from working for awhile. I am upside down on car payments and need to get out from under them.

Answer 1

If you give the car to the bank and stop payments, they will sell it at an auction and you will owe them the difference between the sale price and what you owe them. The difference will be a lot, since they will likely get wholesale rather than retail value. If you don't pay them the difference they will place it on your credit report, and probably have a credit bureau chase you for the money. At that point your credit score will be terrible, and no one will loan you money at a reasonable rate.
You would be much better off selling it yourself, adding some of your own money to it, and then paying off the entire amount of the car loan.

Answer 2

The bank may have other options for you, like deferred payments. I've worked for a car loan servicer before and we offered this. If you absolutely cannot keep the car, it is better to have a voluntary repossession rather waiting for them to get it. No matter what type of repossession you do, since you're upside down in the loan there WILL be a balance due that you will be responsible for. Any chance you can sell the car and come up with the difference, or have a friend/family member take over payments for a while? You say you're off for medical reasons....do you have a disability clause on your loan? if so, then you're covered!! To the first answer on here about wrecking it...that's a great idea, really! As long as your insurance is current and make sure it's a total loss. Do something like park it on a hill and let it roll backwards into a wall or over a cliff. Just don't tell a lot of people so you don't get in trouble.

Answer 3

You should not have the bank reprocess your car for many reasons. Your credit will show a "Repossession" on your credit report and that "Secured Debt" will become a "Unsecured Debt" and anything left over after the auction will still need to be payed by you. You would be better by selling it yourself and paying proceeds to the Creditors under some sort of agreement to avoid such "Repossession". However, if you are in a serious credit crisis (Bank Foreclosures, Repossessions") you may want to involve a attorney to help negotiate special payment terms with creditors or file Chapter 13 Bankruptcy to protect your assets.

Answer 4

You can talk to the bank about your situation and allow them to repossess the car. It will then be sold at auction for far less than you would get in a conventional sale arrangement, and they will hold you responsible for the difference owed.

You are best to approach them in advance with your dilemma and attempt to work out a repayment program with them for the difference. If it's a decent local bank, they may even allow you to sell the car for a better price, and release the lien when you show up with the total amount you obtained for the car.

Answer 5

My husband was in a similar situation before we were married. He gave them back the car ( it was a credit union he dealt with) and had to still make payments every month to them. He had a co-signer and they threatened to com e after that person if he didnt pay them back. We paid off the debt he still had bad credit for hte next 7 years because of this. If I were you I wold sell the car for as much as you can and pay that back to the note holder. Then make a deal with them for low monthly payment to pay off the remaining balance.
Don't just stop paying them because you'll end up with such a bad credit score it isnt worth it.

Answer 6

This is called voluntary repossession. It will be somewhat negative on your credit, but not as negative as a regular reposession.