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(Duncan Alfreds, News24)
A Fin24 user can no longer afford the high instalment on her car. She writes:
Is it possible to return my high instalment car finance to the bank and request that they finance with a cheaper car, in order to secure a home loan?
Rudolf Mahoney of WesBank responds:
Unfortunately it is not as simple as returning the car to the bank.
You are contractually obligated to repay the loan, and the only way for you to exit the agreement is to settle the outstanding balance in full.
In your case it would be a lot easier to trade in your current car, which you are unable to afford, for a less expensive vehicle. Any reputable dealership should be able to facilitate this for you.
The dealer will then settle the outstanding balance on the existing account and at the same time facilitate the finance application for the new car.
The interest rate is determined and set out in the credit agreement at the inception, adds consumer law expert and MD of the SA Law Centre, Nicky Campbell.
Hence, a new transaction would have to be entered into for the consumer to “organise a better deal”.
Regarding the calculation of interest, the National Credit Act stipulates that interest may be calculated daily and added to the deferred amount monthly.
The creditor is therefore entitled to allocate the client’s monthly instalment to servicing the capital amount and to paying the interest that has accumulated in that month.
- Fin24
Do you have a pressing financial question? Post it on our Money Clinic section and we will get an expert to answer your query.
Is it possible to return my high instalment car finance to the bank and request that they finance with a cheaper car, in order to secure a home loan?
Rudolf Mahoney of WesBank responds:
Unfortunately it is not as simple as returning the car to the bank.
You are contractually obligated to repay the loan, and the only way for you to exit the agreement is to settle the outstanding balance in full.
In your case it would be a lot easier to trade in your current car, which you are unable to afford, for a less expensive vehicle. Any reputable dealership should be able to facilitate this for you.
The dealer will then settle the outstanding balance on the existing account and at the same time facilitate the finance application for the new car.
The interest rate is determined and set out in the credit agreement at the inception, adds consumer law expert and MD of the SA Law Centre, Nicky Campbell.
Hence, a new transaction would have to be entered into for the consumer to “organise a better deal”.
Regarding the calculation of interest, the National Credit Act stipulates that interest may be calculated daily and added to the deferred amount monthly.
The creditor is therefore entitled to allocate the client’s monthly instalment to servicing the capital amount and to paying the interest that has accumulated in that month.
- Fin24
Do you have a pressing financial question? Post it on our Money Clinic section and we will get an expert to answer your query.
Disclaimer: Fin24 cannot be held liable for any investment decisions made based on the advice given by independent financial service providers.
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