What would you do without your car?
If you’re having trouble affording your car payments then that thought may have crossed your mind.
As you probably know… banks and creditors take back cars when borrowers don’t pay. This is known as vehicle repossession.
Luckily, it doesn’t happen overnight. Here’s how the process works and what you can do if you can’t afford your car payments.
Car repossession process
When car payments fall behind or go unpaid, creditors and debt collectors turn to debt recovery tactics like repossessing the borrower’s car (or other secured assets depending on the loan).
The car repossession process unfolds over several months, here’s how it goes down.
The vehicle repossession process in South Africa:
- The borrower gets notice of default (Section 129 notice)
- There’s time to pay or apply for debt counselling
- If things aren’t resolved, the court issues a summons
- A court hearing either grants or denies the repossession order
- If granted, the vehicle gets repossessed
- The lender auctions the vehicle
- The lender may pursue further legal action to recover the shortfall
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The borrower gets notice of default (Section 129 notice): The lender sends the debtor (the person who isn’t paying) a Section 129 notice. The notice states that the loan is overdue and details the outstanding amount and solutions. Its one of the first formal steps in the debt collection process.
There’s time to pay or apply for debt counselling: The borrower has time to respond and resolve the issue by paying the debt or applying for debt counselling. Usually 20 business days.
If things aren’t resolved, the court issues a summons: If the borrower doesn’t resolve the issue, then the lender can ask the court for a summons. Which lets the borrower know that legal action will follow. It also informs them of the date of their court hearing.
A court hearing either grants or denies the repossession order: There’s a court hearing where both sides get to make their case. The court can decide in two ways:
- A: Grant repossession = If the court agrees with the lender, it will issue a repossession order. Known as a warrant of execution.
- B: Deny repossession = If the court sides with the defendant (the borrower), the repossession can be stopped, and an alternative ruling could allow more time to settle the debt.
The lender may pursue further legal action to recover the shortfall: If the court grants the repossession order, the lender can take back the car, usually with help from a sheriff. There is no specific timeframe for repossession, but it typically happens within days to weeks after the court’s decision.
The lender may pursue further legal action to recover the shortfall: The lender sells the car at a public auction to get back the money that is owed to them.
The lender may pursue further legal action to recover the shortfall: Sometimes the auction doesn’t make enough money to cover the outstanding debt and fees. This is known as a shortfall. If that’s the case then the lender might take more legal action to get the rest of the money.
How long does it take for a bank to repossess a car in South Africa?
The time it takes for car repossession can vary. It depends on how quickly the legal process moves and how the borrower responds to the default notice. Overall, from the first missed payment to repossession, it typically takes several months.
Car repossession laws in South Africa
Since it relates to credit in South Africa, repossession laws follow the National Credit Act (NCA). According to the Act, a court must be involved. And, as such, creditors have to follow a specific legal process and provide clear information with each step.
Here are the key points the NCA includes:
- The process must follow the specific legal steps: Before starting repossession, lenders must send a notice of default and give the borrower a chance to fix the problem.
- Credit providers must meet their obligations: Lenders must give clear information about the loan terms and what happens in the event of a default.
- A court has to be involved: Repossession can only happen with a court order. This protects both sides and gives each party a chance to state their case.
- There are specific auction regulations: The act controls the sale of repossessed cars. It makes sure cars are sold at public auctions to get a fair market price.
Okay, we’ve covered the process and basic laws that govern it all. Now it’s time for the valuable info…
How to prevent someone from getting a warrant of execution to repossess a car.
Especially if you can’t afford it.
Can’t afford car payment: What are my options in South Africa?
There are several things you can do if you can’t afford your car payment. The options include negotiating with creditors, selling the car to settle the debt, and applying for debt counselling (debt review).
Let’s take a closer look at each.
If you’re having trouble making car payments, here are some options in South Africa:
- Talk to the lender to negotiate a settlement or alternative repayment plan: Talk to your lender as soon as you have financial problems. They might offer new payment plans, a break from payments, or a lower total to help you.
- Sell the car to settle the outstanding debt: If possible, sell the car to pay off the loan. This can help you avoid extra legal fees that come with repossession.
- Debt Counselling (debt review): The National Credit Act introduced debt counselling to help and protect South Africans who can’t afford their debts. Debt counselling has lots of advantages, which make it an excellent solution to this problem. Firstly, under debt review, the payment is reduced to make sure you can afford it. Usually by several thousand Rands. Secondly, the process offers legal protection. This means creditors aren’t allowed to take the car. And finally, it is structured and consolidated, which makes it easier to pay off the debt
What is your estimate? *The calculation is an estimate actual amounts may vary. What is your estimate? *The calculation is an estimate actual amounts may vary.
Try our debt reduction calculator to calculate your lower monthly debt instalment*.
Try our debt reduction calculator to calculate your lower monthly debt instalment*.
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In summary
Now you know how it all works. Hopefully, that means you’re equipped to deal with it.
Honestly, for most people in this situation, the smartest thing to do would be to use a service like debt counselling (debt review) to take care of it.
Selling the car can work, but there could be a shortfall. Then the car is gone, and there is still some debt to repay.
Want to protect your car from being repossessed? Talk to us at My Debt Hero – we can help!
