The Pros And Cons Of Voluntary Repossession


Voluntary repossession is a process in which a borrower surrenders their car, home, or other property to the lender to avoid defaulting on payments. While this may seem like a good option for those struggling to make ends meet, there are both pros and cons to consider before making a decision.

Pros of Voluntary Repossession

1. Avoiding Repossession Fees

When a lender repossesses a property, they often charge the borrower a fee for the repossession process. By voluntarily surrendering the property, the borrower can avoid these fees and potentially save money.

2. No Legal Action

Voluntary repossession avoids the need for legal action by the lender, which can be time-consuming and costly for both parties. By taking this step, a borrower can prevent damage to their credit score and avoid legal fees associated with defaulting on payments.

3. Control Over the Process

When a borrower voluntarily surrenders their property, they have some control over the process. They can choose when to surrender the property and make arrangements with the lender to ensure a smooth transition. This can help reduce stress and anxiety associated with the repossession process.

4. Reduced Debt

Voluntary repossession may help reduce a borrower’s debt by allowing them to walk away from a property they can no longer afford. While this may negatively affect their credit score, it can also provide some relief from debt and allow them to move on to more manageable financial situations.

5. No Need for Court Action

Voluntary repossession eliminates the need for court action by the lender, which can be time-consuming and costly. This can also help prevent the lender from obtaining a court order to repossess the property.

Cons of Voluntary Repossession

1. Damaged Credit Score

Voluntary repossession can negatively affect a borrower’s credit score, as it is viewed as a default on payments. This can make it harder to obtain credit in the future and can result in higher interest rates and fees.

2. Loss of Property

Voluntary repossession means giving up the property in question, whether it is a car, home, or other asset. This loss can be significant, especially if the property has sentimental value or is a necessity for daily life.

3. Possible Deficiency Balance

When a borrower surrenders their property, the lender may sell it to recoup their losses. If the sale price does not cover the borrower’s outstanding balance, they may be responsible for the remaining deficiency balance. This can add to their financial burden and make it harder to move forward.

4. Limited Options for Future Credit

Voluntary repossession can limit a borrower’s options for future credit, as it can negatively affect their credit score and make them appear high-risk to lenders. This can result in higher interest rates and fees, making it harder to obtain loans or credit cards in the future.

5. Emotional Stress

Voluntary repossession can be emotionally stressful for borrowers, as it involves giving up something they may have worked hard to obtain. This stress can lead to depression, anxiety, and other mental health issues.


While voluntary repossession may seem like a good option for those struggling to make payments, it is important to consider the pros and cons before making a decision. While it may help avoid fees and legal action, it can also negatively affect a borrower’s credit score and limit their options for future credit. Ultimately, it is up to the borrower to decide what is best for their financial situation and well-being.