Every year millions of people buy new cars using finance or personal loans. Quite a number of these people have overstretched and find themselves unable to afford the repayments.
What Can You Do If This Happens?
Firstly, work out how much is owed and get a settlement figure from the finance company; then you could explain to them the problem you have, and quite often they will be lenient and reduce your payments or even stop them for a short period of time.
What Are the Options?
You could trade your car in for a cheaper one. By doing this, you could set up a new loan that covers the amount on your initial loan plus the cost of the new cheaper car. This will bring your payments down and spread them over a longer period. However, be aware that you are now paying more for a car that’s worth less.
Could You Stop Making the Payments?
This is not a good idea. It will affect your credit rating and won’t solve the problem. You could end up with extra interest charges and, at worst, repossession of your vehicle. Even if they sell it, they will charge you collection charges and auction costs and will probably sell it for a lot less than it is worth, and you will still have to pay them the difference.
Leasing
Personal leasing is a form of contract hire. You make monthly payments, as with a loan, but the car is never yours: you are effectively renting the car. Car leasing in Leicester from http://leasing.totalmotion.co.uk/ is an example.
Selling
You could sell the car yourself. You would probably not get enough to pay off the total loan but could get a personal loan to pay off the balance. You must advise the original loan company before you sell the car, as it is still legally their property and will show up on any searches made by the potential buyer.
Surrender
A final option is to surrender the car back to the finance company. If you have had the car for two-thirds of the agreement term, you can return the car. They will sell the car and advise you if there is a small deficit. Frustratingly, this means you are paying for something you no longer own.