You might be in perfect control of your finances right now, but you can never predict what will happen down the line, and at some point, like so many people around the world, you may find yourself in over your head with debt. If this happens, you must be prepared for any eventuality.
If you are already battling with debt and worried that your car may be repossessed, it is even more essential that you find out all the details and information you can NOW so that you can take action to remedy your situation and perhaps salvage your vehicle and any other assets that you may own.
How does repossession work?
When an individual applies for a loan to finance their vehicle from a financial service provider, the financial service provider will usually want to see two things before approving the loan: they will want to know that the individual has a steady and reliable income that will cover their living costs as well as their loan repayments with interest.
The financial service provider will also want to see that the individual has a good credit record and a high credit score with no record of non- or late payment. If the individual has these two things, the financial service provider will usually approve the loan and finance the vehicle.
A contract is then signed between the financial service provider and the individual, stating that the individual MUST pay a certain minimum monthly payment (which will include interest) at a certain time every month. If, for some reason, the individual cannot afford to make the payment in full, on time or at all, the financial service provider will then be within their rights to repossess the vehicle. They may take it away from the owner immediately, or they may sell the loan and the vehicle to a third party who will be within their rights to repossess the vehicle immediately.
Sometimes, if the transgressions of the individual against the contract were serious enough or prolonged enough, the financial service provider will not even be required to inform and warn the individual before repossessing the vehicle. However, in most cases, the financial service provider is required to give the individual a warning before they repossess the vehicle.
Often, financial service providers will keep the vehicle for a holding period before selling it on to make their money back. This holding period allows the individual an opportunity to pay what they owe and get their vehicle back.
What can you do to avoid repossession of your assets?
If you begin to find yourself overwhelmed with debt and you are shortly to be unable to make your loan repayments, the first thing you should do is to make an appointment with a debt counsellor. Once you have done this, they will help you decide the best plan of action. They will also let all of your creditors know that you are undergoing debt counselling. This way, it is unlikely that your vehicle can be taken away from you or any other legal action can be taken against you.
The debt counsellor will work out a payment plan that you can afford and perhaps advise you to take out just one loan that will cover all your other debts, so that you are only paying off one loan at a time.
What if my car was repossessed?
If your vehicle is repossessed and you haven’t yet visited a debt counsellor, your next step is to find legal assistance. Ask your attorney to look through the vehicle finance contract and see whether the financial service provider acted within their rights. If they did follow protocol, your next option would be to try and get the money together to pay what you owe before the holding period is over.
You would be wise to also visit a debt counsellor to make sure that all your finances are in order and that you are managing them properly.