If you are having difficulty meeting the payments on your car loan because of job loss, your first step should be to check your loan agreement to see if the car is secured or not under the loan.
Most loans for cars are secured loans; which means that the car may be seized if the required payments are not made. If the car is not security for the loan, your lender cannot seize it unless they have a court order authorising the Sheriff to take possession of the car. This process can and does happen very quickly.
If your car is used mainly for business or employment purposes it is excluded from the provisions of the consumer credit law; your lender may not be obliged to consider your request for flexible payment arrangements unless they have signed up to the code of Banking Practice.
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If your car is security for the loan
If you purchased your car from a car-yard and the dealer organised the finance for you, then it is likely that the car is security for the loan. Under these circumstances, your lender can seize the car if you do not make payments according to the loan agreement. This means:
- your lender will be able to repossess the car if the loan falls into arrears. (Your lender will need a court order to repossess your car if you have repaid more than $10,000 or more than 25% of the loan amount under contract, whichever is the lesser amount); and
- your lender can sell the car and credit the proceeds to your loan; and
- costs associated with repossession and selling the car will be added to the total amount you owe; and
- if money from the sale of your car is insufficient to pay out the loan (as is often the case due to interest charges and depreciation) you will still owe the lender the outstanding balance.
A lender or repossession agent cannot repossess your car from your property without your written consent or a court order. You can refuse to sign the consent form and seek legal advice. However, the lender or repossession agent can repossess your car without consent if it is parked outside your property, including at your place of work.
If your lender threatens to repossess your car, you can contact the relevant industry ombudsman or take the matter to court urgently. Your application needs to include a request that all enforcement action be put on hold.
If you’re having difficulty paying your car loan you may request a hardship variation from your lender, and if refused , you may contact the relevant ombudsman scheme.
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If your car is not security for the loan
If you purchased your car using an unsecured or personal loan, you have a number of options for approaching your lender and asking for consideration in light of your changed circumstances.
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