With climbing fuel prices, interest-rates, and the cost of goods, many South Africans start to struggle to keep up with debts. This is when the possibility of vehicle repossession becomes an unfortunate threat that many South Africans could face.
In this month’s blog, we are going to uncover how to avoid getting your vehicle, and other valuable assets, repossessed when you are struggling to make ends meet and have to endure growing debt bills.
In a nutshell, if you are unable to make timely repayments on your vehicle, it is at risk of being repossessed by its lender and/or credit provider. In South Africa, missing over three months of repayments often warrants repossession.
When you enter into an agreement with the vehicle lender, the repayment terms are stipulated and you should be notified of potential repossession before it happens.
Note that your vehicle can be repossessed on private property, however, lenders must do so respectfully and without causing damage to private property or disturbing the peace.
When you are in debt with your vehicle repayments, your lender will obtain a court order to repossess the vehicle. Before the repossession procedure takes place, you are summoned to court where a trial is held and you have an opportunity to justify why you missed the scheduled repayments.
However, before you are summoned to court, you can opt for voluntary surrender. This simply means you voluntarily surrender your vehicle to your lender and/or credit provider.
The process of repossession and dealing with debt can be stressful. Most times voluntary repossession is a good option in order to avoid legal action. Another positive benefit of voluntary surrender is that your lender will organise the repossession procedure and you will not be held liable for those costs.
When it comes to the process of a repossessed vehicle auction, your car will be sold by an auction agency at a public or private auction and the proceeds will be used to cover your owing amount on the vehicle.
However, if there is a leftover amount still owed (known as the ‘deficiency’), you will be held financially liable for those costs, as well as any other expenses accrued throughout the auction process which could, unfortunately, prompt further asset repossession. On the other hand, if the sale proceeds are beyond the owed amount, you will be entitled to receive the excess amount.
Although the repossession process may seem set in stone, there are a couple of options you can investigate to avoid getting your vehicle repossessed.
Selling the vehicle may be a good option in order to avoid repossession entirely – especially if the proceeds of the vehicle sale can cover most of or all of the owed amount. It may also present an opportunity to frugally purchase another vehicle with a lower repayment amount in the nearby future.
Maintaining clear and calm communication with your lender throughout the process may allow for repayment terms to be renegotiated or open an opportunity for voluntary repossession before legal action is taken.
There are several benefits of better debt repayment terms, but it can be tricky to get creditors to approve these terms. If you want some help with this, reach out to a debt counsellor for help.
Refinancing your vehicle loan requires you to take out another loan to cover the missed repayments or the entire amount owed. This may be a tricky decision to make as it will result in continued debt as well as added interest.
If you are able to timeously catch up on your missed repayments and cover the repossession costs, you can get your vehicle loan reinstated.
With this particular process, you will get your vehicle back and resume with the original repayment terms. Alternatively, your lender may offer a settlement amount to avoid imminent repossession, which will likely include the amount owed from missed repayments and interest.
One of the most significant consequences of vehicle repossession, besides not having immediate access to transportation, is the negative impact on your ability to build a strong credit score.
This is where debt review comes into the picture.
By applying for debt review, your assets fall under protection from repossession. When under debt review, you are also saved from having to communicate directly with your credit providers. Essentially, debt review protects over-indebted South Africans and helps to remedy their financial situation.
Here are a few of the multiple benefits that debt review offers:
Introduced in 2007 by the National Credit Regulator, debt review in South Africa was created for over-indebted consumers to consolidate debt repayments and help them get out of debt safely and efficiently. If you would like to learn more, we have a useful article that covers how to apply for debt review in South Africa.
We hope this blog helped map out what the vehicle repossession procedure in South Africa entails and provides you with a list of alternatives to completely avoid it.
Remember, your financial future matters. If you are struggling to manage or eradicate your debt, do not hesitate to reach out to us today – our team would love to help you get out of debt so that you can start to build your wealth.
Find out if you’re eligible to reduce your debt and protect your belongings.
Disclaimer: This website and any information herein is not intended to be, nor does it constitute, financial, tax, legal, investment, credit, or other advice. Before making any decision or taking any action regarding your finances, you should consult a qualified professional directly.