NOMPU SIZIBA: During the current economic difficulties households are under strain. Today we focus on those who perhaps are struggling to pay their monthly instalments on their car. A car is such an important tool because it can assist in someone being able to get a job. Both the car owner and the vehicle lender have rights, so it’s important when one gets into a financial pickle to know what one’s rights are if affordability of the car becomes tricky.
To tell us more, I’m joined on the line by Sarah Nicholson. She’s the commercial manager at personal finance website company JustMoney. Thanks so much, Sarah, for joining us. So, what happens if you’re suddenly financially constrained and you know you’re going to struggle to make your car repayments? Presumably you must speak to your lender immediately to see what’s possible.
SARAH NICHOLSON: Absolutely. Typically, if you realise that you’re getting into a situation where you know you’re not going to be able to make payments, I like to say to them that prevention is really better than the cure. Don’t wait until that last minute when you are actually getting a notice from the bank saying, listen, you are in arrears. What you rather want to do, if you realise that you’re not going to be able to make it, is to reach out to the credit provider, explain the situation to them, and let them know that, listen, you’re not going to be able to make the next payment. Is there an arrangement that they can potentially make?
Typically what they could do is they could either extend the period of the loan to you, and that would then lower the monthly repayments, or they could defer that for just the short term – almost like a payment holiday. But, again, if you are going to look at that option, you just need to be aware that the interest is still going to accumulate and you are at risk of your debt increasing, which will not help in the long term.
NOMPU SIZIBA: What happens if your lender is of the view that you’re not going to be able to make the necessary payments and they want to get the car, so that they can cut their losses? What’s the procedure that they need to follow?
SARAH NICHOLSON: Typically what the bank would need to do is they would issue you with a Section 129 notice from the National Credit Act, and that could be telling you that you are in arrears, and that they want to go ahead and collect the vehicle. Then typically what they will need to do is issue you with a warrant of execution, or execution warrant. And then they would need to come through obviously to the property with the sheriff, who would then deliver that notice to you. You would then have time from that period, that time, to obviously return the vehicle.
Alternatively, what you could do is stop this before this kind of thing happens – and you can also decide to return the car if that’s something you’d like to do.
But what you could do is reach out to a reputable debt counsellor. They typically would help with things like this, and they would actually negotiate with the credit provider on your behalf to reduce the interest rate, and also look at a repayment plan that’s more affordable for you and your budget. They have more swing with the credit providers for a potential option to look at the retail value of that car, and select and get a smaller car if you ned to. There’s nothing wrong with that to get you from A to B, If that’s going to help you for the time being.
NOMPU SIZIBA: Yes. So how does one qualify for the debt-review process? And, of course, if you do get into it, it does mean that you are not able to take on any further debt.
SARAH NICHOLSON: Correct. So typically what you’d need to do is obviously reach out to a qualified debt counsellor. They would assist you, assess your situation, see if you are eligible for debt counselling and then they would go through the due process.
Typically you need to be earning a salary because you need to make a monthly payment for this. You need to make your debt repayment for this. They obviously get in touch with the banks and drop that interest rates quite substantially, which means you will be paying less on your debt in the long run. So it’s handy from that point of view.
In terms of credit, you need to understand as well that this is a rehabilitation process.
You’ve got into a situation where you’re in a lot of debt – and getting into taking on another credit agreement during this time is not necessarily going to be good for your financial future.
Why you’re not allowed to – obviously you cannot – doesn’t necessarily stop you from getting a rental agreement or cellphone agreement through companies like Telkom. But, obviously, for other credit, like getting a loan, you are restricted.
NOMPU SIZIBA: So if anybody is in a situation where their car is being repossessed, or it’s under threat of being repossessed, they do have options and people can’t just come and bulldoze over them to get their car.
SARAH NICHOLSON: Absolutely. So the banks and the lenders need to follow due diligence and the due process. Unfortunately, what can happen is that a lot of the banks will use a debt collector, and a debt collector would come to your address. They would ask you to sign a form. That form is typically a voluntary submission or voluntary form which, if you sign, means you voluntarily are handing over your car. If that happens, that’s not something that you have to sign. They’ll have to bring the sheriff with a warrant to come and collect the car.
But, before this, the bank has to issue or the creditor has to issue you with a Section 129 notice, to let you know that this is going to take place. They cannot just pitch up at your property and take the vehicle. They have to follow due process.
NOMPU SIZIBA: That was Sarah Nicholson, the commercial manager at JustMoney.