“I bought a house/car/boat/etc but I cant make the payments. I’ll just send the lender the keys and let them take it…

Read the Original at

April 28th, 2006

First I have to make a distinction on this myth which often leads to making this problem much, much worse. Often, people in this situation confuse the business they bought the item from with their lender.

While it is true that more and more dealerships are offering in-house financing programs, often the business that holds your loan is different than the business that sold you your car. Therefore, sending the keys to the dealership you bought your car from might not solve any of your problems.

As for sending the keys to the lender, this is the worst move to make in this situation (except if you do nothing and let the item be repossessed).

In this case, sending the keys back to the lender will most likely result in the item being sold at auction. Then the lender will come after you for the difference between what you owe and what it sold for, as well as repossession fees, penalties. This can result in poor credit marks (almost certainly) and/or a lawsuit.

The best way to handle this situation is to sell the item yourself. Even if you need to sell it at a small loss, the money you pay out of pocket will more than make up for the huge toll that will be taken on your credit rating (not to mention the potential legal fees).

Entry Filed under: Financial Myths
Related