The Car Repossession Process: All Your Questions Answered
The car repossession process can be quite frustrating, and with the financial pressures of rising interest rates and unexpected expenses, many vehicle owners find themselves in this nerve-wracking situation.
In this blog, we will dig into crucial aspects of the repossessed cars meaning, offering insights into the legal procedures, protective measures, and alternatives available to individuals facing repossession. From understanding how many payments can be missed before repossession to the intricacies of restructuring payment plans, we cover all there is to know about repo cars in SA.
How Many Car Payments Can You Miss Before Repo?
Car repossession generally happens because consumers breach their vehicle loan agreement, typically by missing payments. Although a bank can technically carry out a car repossession after just one missed payment, they’re required to follow a legal car repossession process mandated by the National Credit Act (NCA), which means repossession isn’t immediate.
After missing a payment, expect to receive a letter of demand or Section 129 from your credit provider outlining your options, like debt counselling, mediation, or arbitration. If you’re in default for over 20 days, a summons from the court follows, and you have ten business days to respond. It’s a critical time to consider legal advice.
The Car Repossession Process: Restructuring Your Payments
The good news is banks generally prefer to avoid the car repossession process. More importantly, they would rather you contact your bank early to discuss possible payment alternatives. This might involve a short-term plan to pay off the debt in about six months or extending your contract term to reduce monthly payments.
Voluntary surrender is another path. It involves selling the car yourself or with the lender’s help to cover the loan. This option can prevent the stressful and costly legal process of repossession. If you have a repossessed car that has not yet been sold, you might have a chance to reinstate the loan and resume payments.
How Long Does It Take To Repossess The Car?
Just like with house repossession, the car repossession process starts when you begin missing your payments. It’s important to recognise the early warning signs and act promptly. If you find yourself struggling, banks might offer solutions like a payment holiday, renegotiating your contract to lower interest rates, or extending payment terms.
If these options aren’t available, or if you don’t take them, the situation escalates. For house repossessions, a section 129 letter gives you 10 days to apply for a debt review, failing which legal action can lead to repossession. Similarly, in the car repossession process, if you don’t address your missed payments promptly, legal action can be initiated.
The Car Repossession Process: Legal Procedures and Protections
A significant difference in the car repossession process is that it doesn’t always need to go through a court. However, as a borrower, you’re protected against illegal seizure of your asset. The creditor must follow the correct legal car repossession process, and any deviation could annul a deficiency claim, leading to an illegal car repossession.
In South Africa, laws governing the car repossession process are strictly governed by the National Credit Regulator, ensuring that all processes are fair and legal. As a borrower, this protection ensures that your assets cannot be seized through a questionable or unlawful car repossession procedure.
If all else fails and the bank decides to repossess, the car repossession process is quite straightforward. Unlike property, which is often sold through auction, bank repo cars can be handled differently. However, the fundamental principle remains the same: the asset is taken and sold to recover the outstanding debt.
What Is The Process For Car Repossession In South Africa?
When you purchase a car through banking finance in South Africa, the bank or lender essentially owns the car until you’ve repaid the entire loan amount. If you miss payments due to unforeseen circumstances, the bank has the right to repossess the vehicle. Here’s how the car repossession process happens in South Africa:
- Default Period: Car repossession, like the MFC car repossession process at Nedbank, for example, typically begins when your finance account defaults for 75 to 90 days.
- Warrant of Execution: With most banks, for example, in the Wesbank car repossession process, the bank must obtain a Warrant of Execution from the court before repossessing your car. This warrant is essentially a legal court order permitting the credit provider to take possession of your vehicle.
- Voluntary Surrendering: During the Standard Bank car repossession process and most of the other major banks, you can choose to surrender the vehicle voluntarily to avoid legal costs. In this case, the financial institution provides a written estimate of the car’s value and auctions the bank repossessed cars to take over payments.
- Auctioning the Vehicle: Once repossessed, the bank attempts to sell the vehicle at an auction. This is the course of action undertaken during the Absa vehicle repossession process and all of the South African banks. If the sale doesn’t cover the outstanding amount, you’ll be responsible for the shortfall, which can be paid in instalments if agreed upon with the credit provider.
- Consequences of Non-Payment: If there’s a shortfall and you refuse to pay, the bank may seize your other assets or obtain a garnish order to deduct a specific amount from your salary until the debt is cleared.
The Car Repossession Process: How To Avoid It
Seeking debt counselling with National Debt Advisors early on is a proactive measure to safeguard yourself from car repossession, particularly when you find yourself struggling with monthly loan repayments. This step not only provides you with expert guidance but also helps in structuring a feasible repayment plan. Concurrently, if confronted by a debt collector regarding a car repossession, it is crucial to refrain from signing any documents without prior consultation with a debt counsellor.
These professionals offer essential negotiation support with the bank, steering you through the complex car repossession process. Furthermore, it’s important to be aware of the financial and emotional toll of the car repossession process, including significant legal expenses and the potential for a shortfall in auction sales. Additionally, be cognizant of the long-term impact on your credit score, as a default and subsequent repossession can severely hinder your ability to secure future financing.
Can A Car Be Repossessed Without A Court Order?
In South Africa, a car cannot be legally repossessed without a court order. The car repossession process mandates that a credit provider must first obtain a court order, known as a warrant of execution before they can repossess a vehicle. This court order is essential and informs the debtor about the permission granted to the credit provider for repossession. Without this court order, a debtor should not surrender their car for repossession.
Can Your Car Be Repossessed While Under Debt Review?
Dealing with financial difficulties can be overwhelming, but there’s a solution that often goes underutilised: debt review. This process offered by expert debt counsellors from National Debt Advisors not only helps you manage your finances better but also provides protection against one of the most distressing experiences you could face – repossession.
The Car Repossession Process: The Importance Of Being Informed
While it often comes with heavy trauma, the car repossession process is not just an emotional nightmare but can also lead to hefty legal fees and a negative impact on your credit record. However, it’s crucial to know your rights. Legally, only a court-appointed officer with a valid court order can enter your premises for repossession. Unfortunately, many debt collectors exploit those unaware of this fact, often leading to the unnecessary surrender of assets.
To avoid being scammed or taken advantage of, it’s always important to understand the repossessed meaning. If you ever find yourself in a situation where someone is attempting to repossess your assets, always ask for identification and a stamped court order. Without these, you are not obliged to allow them onto your premises or sign anything. Be particularly cautious of debt collectors who try to intimidate or deceive you into signing a voluntary surrender document for your vehicle. This action could leave you regretting it deeply, as you’ll still owe the full amount on the vehicle even after it’s been taken away.
The Relief of Debt Review with National Debt Advisors
While it can be the lifeline that helps consumers save their assets from repossession, debt review is about more than just car repossession; it’s a comprehensive solution that reduces your monthly debt payments and frees up more funds for your daily expenses. More importantly, it addresses both financial and emotional distress. Under debt review offered by National Debt Advisors, creditors and debt collectors can no longer harass you. Any communication from them can be redirected to your debt counsellor, who will handle these matters on your behalf.
The best time to seek debt review is as soon as you feel the financial strain, not when legal actions and the car repossession process by creditors have already begun. However, it is never too late. National Debt Advisors, voted SA’s best debt counselling company in 2020, is an excellent place to start. Contact us today.