Consumers are grappling with the current recessionary environment in South Africa. This can lead many people to make poor financial decisions, such as skipping a deposit payment on a vehicle, resulting in a bank repossession.
Personal finance website JustMoney investigates what happens when a lender wants to repossess your vehicle and how you can help prevent this scenario.
Jaco Hamman, attorney at Hahn and Hahn, notes that when you miss your first payment, the lender will let you know that you have a certain number of days to catch up. Failure to pay thereafter authorizes the lender to cancel its financing agreement with you.
Hamman said the lender must first take action against you, such as issuing a subpoena.
“The summons will be delivered to your address via a sheriff. If you do not defend the summons, the lender can obtain a judgment and a warrant of execution. It is only through this execution warrant that a sheriff can repossess your car,” Hamman said.
However, the lender has no right to bully you and lie to you, alleging that your vehicle can be repossessed without following due process.
Hamman said there are many lenders who use debt collectors to repossess your car. Collection agents will arrive at your address with a form telling you that you must sign the form and return the vehicle.
“This form is actually a voluntary surrender form in which you declare that you are voluntarily surrendering your vehicle. There is no obligation on your part to sign such a form and return the vehicle to the lender or its collector,” Hamman said.
“Make sure it’s a legitimate repossession through the sheriff. Otherwise, you have the right to refuse to return the vehicle,” he said.
Section 127 of the National Credit Act provides that consumers voluntarily surrender their car.
If you find that you are no longer able to meet the payments for your car, you can turn it over to the lender. You can do this by writing a notice letter telling the lender that you want to terminate your contract.
After five working days of delivering the letter, you must return the vehicle or agree with your creditor how the car will be returned.
Your creditor will then give you a written notice stating the estimated value of the car.
You will have 10 days to decide if you still want the car or not. If you are no longer interested, the lender will sell it. If there is a shortfall in the sale, you will still be required to pay for the vehicle.
However, if there is a surplus, the lender will credit your account.
You can avoid recovery
Hamman said you can avoid repossession by reaching a payment agreement with the lender and if that fails, you need to find out if you qualify for debt counseling.
He said that once you are on debt counseling, the only way to change your counselor status is to pay off all your short-term credit agreements.
Your debt counselor status will reflect on your credit report and you will not be able to incur any further debt, which could also affect your ability to rent a property.
Can you adjust your monthly car payments?
As with any credit agreement, you can ask your creditor to adjust your monthly car payments until you are on your feet.
The creditor will reduce your payments and extend the term of your loan. You can also ask your creditor to defer your payments, but this is not advisable as interest will keep accumulating.
It might put you in more debt, but it will bring temporary relief.
“Taking out a car loan is a three to five year commitment that ideally requires careful planning before taking on this responsibility,” said Sarah Nicholson, Chief Commercial Officer of JustMoney.
“Given the economic downturn and rising unemployment, do your homework, shop around and negotiate before signing on the bottom line if you are looking for a vehicle.”
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