My husband cannot afford his car loan; should he repossess his car and affect his credit?

My husband was laid off and is receiving unemployment. He has a $700/month car payment which we can not afford. His loan is now worth more than the value of the car. Should he voluntarily repossess his car and take a hit on his credit? His credit is bad already. What are your suggestions?

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December 2017

Hi, I am sorry to know about you and your husband's sitaution. Repossession of a car can have a negative implication to one's credit rating and can stay on record for seven years. In addition, if the loan amount is greater than the value of the car, the borower will be responsible for the balance and it will stay on record as amount due. 

You may want to see if you can refinance the loan or trade in for a cheaper car to alleviate the situation.

If not, voluntary surrender maybe a better option: You can see if the lender is open to negotiating a better payment plan for the balance on the loan.

If none of this works and the car gets repossesed then apart from having to pay off the balance as soon as possible you will also have to rebuild your credit by managing the rest of your debts well.

All the best.

December 2017