Are you defaulting on your loans and scared that creditors may take your main assets, home or vehicle? There are still ways to stop a repossession order and avoid the possibility of litigation and negative credit scoring.
In this blog, we explore your options to block repo orders and what to do to secure your assets against repossession.
Understand the law and repossession
Creditors and lenders are legally entitled to repossess your goods if you fall behind on multiple vehicle or home instalments, for example. Firstly, review your loan agreement’s details to see if you have the legal right to stop repossession orders by curing the default.
Typically, loan agreements provide notice to address defaults before more drastic legal action is taken. Creditors will remind you of payment defaults and seek a court order when necessary, usually after three months of non-payment.
You can still take several steps to settle the outstanding debts before receiving the court summons and stop repossession orders in their tracks, assuming you are still within the grace period, as discussed. See a few options below.
Negotiate with the creditors
If you have a good credit history and haven’t missed a loan payment before, the creditor may be more lenient in extending your loan duration, thus lowering the monthly instalments. This way, you will be paying more interest during your credit life, but you get to resume the payments timely, stop repo orders, and keep your vehicle or home. ezDebt counsellors help negotiate better loan terms with creditors on your behalf.
Sell the asset to cover the instalments
Selling the asset will stop the repo order but at the high price of losing it. This is not ideal but can be preferable, depending on your financial situation and the asset in question. Also, keep in mind that the sale proceeds may not be enough to cover the loan deficit, and you may still need to pay the difference to settle the debt.
Surrender the asset voluntarily
If the above are not viable options, you are offered the possibility to hand over the assets to the creditor to settle the debt, thus blocking future repossession orders. Creditors will then auction the surrendered goods to fulfil the original loan agreements, just like in case of asset repossession.
Unlike repossession, with voluntary surrender consumers don’t need to worry about associated repo costs, but may still need to pay the lender the cost of storing and selling the goods awaiting auction, for example in the case of vehicle or furniture storage.
Forfeiting your car or home through voluntary surrender seems preferable to losing the assets via repossession, but they can both have a serious impact on your credit score, which results in the inability to secure future loans.
However, voluntary surrender is a slightly better alternative than repossession, because it requires working with the lender to resolve the debt instead of reaching litigation.
Therefore, creditors are more likely to favour voluntary surrender of assets over repossession when reviewing your credit history, especially in dire financial circumstances such as the current pandemic.
According to reports by SA banks dealing with indebted consumers under financial pressure, at least 500 vehicles and 89 homes were surrendered and auctioned in July 2020 alone.
“The depth and scale of voluntary vehicle surrenders and owners trying to offload their homes as the cash crunch bites is potentially in the thousands,” said the cited sources.
Before proceeding with voluntary surrender, talk to a consumer law attorney or a debt professional at ezDebt to ensure the best alternative for your financial situation if you are comfortable giving up the assets.
Seek a debt counsellor and resume repayments
The only way to avoid legal action, block repo orders, and secure your assets against repossession is to keep paying monthly instalments towards the loans. This proves difficult when you are over-indebted and simply can’t afford to pay off your debts anymore.
Entering a debt review process allows you to revise all your debt commitments and be able to make smaller monthly payments rather than no payments at all in order to maintain a positive credit score.
Contacting a debt counsellor is the first step to develop an action plan to continue with the repayments in a way that works for you and your family. The debt advisor will renegotiate favourable loan terms with creditors on your behalf, resulting in a more affordable repayment plan.
Finally, you will be able to pay off the outstanding balance without the worries of legal action and parting away with your main assets like your everyday car or family home.
Drawing on years of experience and extensive negotiations with creditors, ezDebt counsellors are known to reduce monthly instalments by as much as 60% and make debts more manageable to protect clients against undesirable legal action.
EzDebt professional debt advisers can help you stay on track with debt repayments and stop repossession orders. All our debt counsellors are registered with the National Credit Regulator (NCR). Get in touch at www.ezdebt.co.za.