Hi, I am currently on a fixed income which hamper's my ability to continue paying the current amount that I pay on my vehicle per month. Currently I owe roughly 7k more than the vehicle is worth, and the vehicle is now 5yrs old. I would like to purchase a new/newer vehicle(for a lesser payment) that I can rely on for the next few yrs.
Dilemma: Do I send the old car back voluntarily and use the money I have as a down payment?
If I do so how badly would this affect my credit.
Is a voluntary return of vehicle in my case a bad idea?
Thank you in advance
Hi Goodlala by: Justin (Editor in Chief)
A voluntary return of the vehicle is a repossession! It does not matter if you agree to it or the bank takes the vehicle in the middle of the night.
As far as your credit is concerned, this will go down as a repossession on your credit and will damage your credit rating for at least the next 7 years.
I can't really say one way or the other whether letting the car go back is the right thing to do in your situation, but I wanted to make you aware of how damaging it will be to your credit.
A repossession will make future loans more difficult to come by and the terms of your future loans will typically be unfavorable...High interest rates and larger down payments, etc.
In addition to the repo on your credit another factor that will make buying a reliable car with what would be (after a repo) bad credit is your fixed income.
If this fixed income is fairly low (under $1500 mo.) you will run into very big challenges buying another vehicle and may not be in a situation to buy a decent, "newer" vehicle for quite some time.
It is crucial to keep a good credit rating with smaller fixed incomes otherwise loans are very hard to come by.
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