Surrendering car and impact on credit rating.

H

Havana

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Hi.

I have a car finance agreement on a car not in my possession. (Long, sordid story- my ex has the car) He has never made any payments on it and i'm at a stage where i just can't afford to keep paying. I have only paid up to this point to try keep my credit rating but it can't continue.

i have spoken to the bank about my options and they said i can surrender the car to them which is not as bad as default and repossession of the car.

i wondering just how bad that would be on my credit rating? Can i write off obtaining credit for a period of time. Can banks put explantory notes on there ICB reports and would that even make a difference?

i've always had a good credit rating, and while i know this is my own doing, its still very upsetting for me.

thanks
 
If you surrender the car by way of 'voluntary surrender' they will sell the car & you will be liable for the difference.

How much is outstanding on the agreement & ho wmuch have you paid. If you have paid over one half of all payments due under the agreement (known as the 'hire purchase price') you can return the car & walk away - no comeback. It's called the 'half rule'
 
I haven't yet paid half. I don't have the exact figures to hand but they said i would have a shortfall of about €2500. Would they stretch this out over a longer period so the repayments would be less each month or would i still have to pay the same as i am paying at present? €300 pm. If i still had to pay this would i be better off continuing to pay until the halfway point?

thanks
 
That's a tough one - with €2.5k left to pay off and payments of €300/month, I guess you're looking at another 9 months. You could ask them to extend the term a bit but I don't know if that's done on hire purchase agreements......

If you go voluntary surrender route, do you know what is left to be paid (even roughly) and what car might be sold for? Because that's what you'll have to come up with.
 
Thanks for your reply.

i might not have been clear enough with my figures above.

I just rang the bank and the figures are as follows.

original loan €18033

Amount paid 6197

arrears 587

settlement 10967

shortfall if surrendered
2765

so obviously waiting till the half way point is not an option. I can negotiate the repayment of the shortfall if i surrender to a figure i can afford.

i'm just trying to figure out now if i should surrender it to them. I am in 2 months arrears what with christmas and that and while i can make the payments each months it really does leave me struggling and with no wriggle room should anything happen like medical expenses etc. I can't guarantee i will be able to make all the upcoming payments so my credit rating is at risk on that front. Is surrendering it the lesser of two evils?
 
Havana said:
I just rang the bank and the figures are as follows.

original loan €18033

Amount paid 6197

arrears 587

settlement 10967

shortfall if surrendered
2765
Click to expand...

I'm not sure where you got this 'shortfall if surrendered' figure from but if that's correct, can you come up with the 2765? It's certainly less than what you'd need to reach under the half rule.
 
Thats the figure the bank have me today on the assumption there is no damage to the car. I'd have assumed that the would sell the car first and then give me a figure. But no, she said if i surrender the car undamaged i would then owe them €2765. The figures don't make perfect sense to me but thats twice they have given me roughly the same figures.

eta just had a look at the credit agreement and the loan was €14500. Assume the 18033 she quoted is including interest? Figures make more sense now.
 
Havana said:
Thats the figure the bank have me today on the assumption there is no damage to the car. I'd have assumed that the would sell the car first and then give me a figure. But no, she said if i surrender the car undamaged i would then owe them €2765. The figures don't make perfect sense to me but thats twice they have given me roughly the same figures.

eta just had a look at the credit agreement and the loan was €14500. Assume the 18033 she quoted is including interest? Figures make more sense now.
Click to expand...

Okay - think I might know what they mean now. But you need to clarify with the bank.

The €2765 is the amount you need to pay to bring you up to the half. Then you can return the car (undamaged) and case closed. No impact on credit record. To end an agreement under the half rule, , you must let your lender know in writing that you are ending it under
the half rule. Having ended the agreement, you must pay half the hire-purchase price, less any payments you have made to date (including any deposit you paid), and return the car. I think that the €2765 would bring you up to the half - BUT ASK BANK TO CONFIRM.

However, if you don't do it this way, or sign a 'voluntary surrender' form, this is different. By signing such a form you give up your right to the half rule, they'll sell the car, deduct what they get for it from what you owe and you'll owe them the rest. Then that's on your ICB report. Similarly, if they repossess, you owe them the difference between what they get for it and what you owe.
 
Thanks again.

but now i'm confused:)

they told me that first i surrender the car then i owe them the 2765 which i can repay over time. When i surrender the car an 'S' goes on my credit report to say i've surrendered the car then when i clear the 2765 a 'C' goes on the report to say its cleared and the S stays for 5 years.

any idea what sort of impact that will have on my ability to get credit over the next few years?

By the way there was no mention of the half rule!
 
Havana,

I'm not an expect in this area but if they say that you'll only owe 2765 after your surrender the car, I'd ask for that in writing.

My understanding of voluntary surrender is that you are still liable for the amount you owe, less what they get for the car, so be careful and get it in writing before you do anything.

I'm not sure what the 'S' or 'C' will do to future lending decisions. Sorry.
 
Thanks a million for all you replies. I think i.m going to just go ahead and surrender the car. I just can't afford to keep repaying the loan. But yeah, you're right. I'll make sure to get something in writing first.

thanks again.
 
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