How to avoid car repossession?

Car repossession is a significant event that can deeply impact one’s sense of security and daily life. The mere thought of losing one’s vehicle can stir a whirlwind of stress and anxiety, overshadowing all aspects of everyday living.

Your car is not just a mode of transportation; it’s a lifeline to the world around you. It’s how you commute to work, drop off your kids at school, and perform countless other daily tasks that require mobility. The fear of losing this vital asset can be paralysing, making it difficult to focus on solutions and take the necessary steps to address the looming threat.

This blog serves as an essential resource, offering more than just an overview of the legalities of car repossession. It provides practical advice and actionable steps that you can take.

The Steps of Car Repossession

Here’s a detailed look at the steps of car repossession and how you can handle the situation:

Notification of Default: Typically, if you fall about 3 months behind on your car payments, your credit provider will notify you of your payment default.
Opportunity to Remedy the Situation: After notification, you may be given a chance to catch up on overdue payments.
Court Order or Voluntary Surrender: Depending on your situation, the credit provider may opt to obtain a court order for repossession or you might voluntarily surrender the vehicle if you know you cannot catch up on payments.
Repossession: If no agreement is reached or payments caught up, the vehicle will be repossessed by the credit provider.
Storage and Auction: Once repossessed, the car will be stored for a period before being auctioned to the highest bidder.
Deficiency Settlement: If the auction does not cover the car’s remaining value as per your agreement, you will be responsible for the difference.

By understanding your rights under the National Credit Act, especially the protections afforded to those under debt review, you can begin to forge a path through the stress and anxiety. Knowledge empowers you to transform fear into informed action, setting the stage for a strategic approach to maintaining ownership of your car and safeguarding your financial future.

Car Repossession While Under Debt Review

If you are under debt review, the law offers you a degree of protection from repossession. Being under debt review means your debt counsellor will negotiate with creditors on your behalf, aiming to restructure your payments to a manageable level.

During this period, creditors are generally not allowed to repossess your car without communicating through the debt review process. Creditors must adhere to the National Credit Act and may require a court order to proceed with repossession if you are under debt review.

Can My Car Be Repossessed Without a Court Order?

Car Repossession without a court order can happen, but typically only when you have not entered into any legal debt restructuring process such as debt review. It’s important to understand the terms of your loan agreement as some may permit repossession without a court order under certain conditions.

How to Avoid Car Repossession

1. Communicate with Your Credit Provider

Initiate a conversation with your lender as soon as you anticipate difficulty in meeting your payment obligations. Transparency can open up several alternative arrangements:

Negotiate Revised Payment Terms: Discuss modifying your loan terms to make payments more manageable.
Voluntary Surrender: In some cases, voluntarily surrendering your vehicle might be a preferable alternative to repossession, potentially reducing the financial impact.
Sell the Vehicle: If feasible, consider selling the vehicle yourself to cover the outstanding loan amount, which might provide you with more financial return than repossession.

2. Settle the Outstanding Amount and Reinstate the Loan

If you have access to funds that can cover the overdue payments, settling your debt is the most straightforward way to avoid repossession. This might involve using savings, obtaining help from family or friends, or acquiring a short-term loan that offers more favourable terms. Ask your lender if reinstating your loan is an option. This process typically involves paying all past due amounts to bring your loan current, along with any associated fees. Be aware that while reinstatement can prevent repossession, it might increase the overall interest paid over the life of the loan.

3. Engage in Debt Review

Immediate Financial Relief: A debt counsellor will work with you to consolidate your debts into a single, more manageable monthly payment.
Negotiate with Creditors: Your debt counsellor will negotiate directly with creditors on your behalf to reduce payments and possibly reduce interest rates as well.
All Living Expenses Covered: Your budget will be carefully planned to ensure all essential living costs are accounted for.

Legal Protection: Once under debt review, creditors are legally barred from repossessing your assets, including your car, as long as you adhere to the new payment plan agreed upon.

If you find yourself overwhelmed by the debt and unsure of the best steps to take, professional help is available. Debt Rescue is here to assist you with managing your debts effectively and avoiding the distress of car repossession. Don’t face these challenges alone, help is just a click away at www.debtrescue.co.za.

Are you struggling with debt while earning an income? Do you owe more than R35K in total to creditors? If so, let our expert counsellors provide a no-obligation, cost-free assessment to consolidate and reduce your monthly repayments for immediate financial relief.