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What happens if I can't afford my car instalment?

Because interest rates have gone up dramatically since 2021, many homeowners and car owners are now having to fork out extra money for these instalments. This can prove to be devastating, especially when there isn't any extra money to pay for these instalments.

“If you are already living very close to the line, and your bond and car repayment both go up with the increase of interest rates, it’s no surprise that this can push you over the edge.” - Founder & CEO of Meerkat, David O'Brien

In an article published by Debtfree magazine, the author states that since 2021, people who are paying bonds and cars, now have to pay an extra R9000 each month just to break even. 

What happens if I cannot afford to pay for my car instalment?

If you can no longer afford your car instalment, and you don’t come up with an alternative arrangement for paying it, your missed payment will be recorded on your credit report. 

Options you could consider if you can't afford to make your car payment:

  • If you can‘t afford to pay for your car, your first step should be to contact your lender (car financing company). Don’t just wait hoping things will resolve themselves. They won’t.
  • You could sell your car and settle the amount you owe using the money you get for the car.
  • You could sell the car and downgrade it to possibly get a smaller monthly instalment. 
  • You could look to refinancing your car loan.
  • You could go under debt review if you are found to be overindebted. (debt counselling).

Keep reading to find out more about these options and to get answers to frequently asked questions!

How do I skip a car payment?

You can skip a car payment, but it will be recorded on your credit report and can negatively affect your credit score. This can affect your chances of getting access to credit in the future. It will either mean that you get credit, but with a higher interest rate or it will mean that you won’t get approved for credit. 

If you miss 3 months or more monthly payments, it’s very likely that you won’t be able to catch up with your repayments again. 

To avoid your car being repossessed, don’t wait until you miss more monthly repayments. Act now!

What can I do if I’ve missed my car repayments or if I’m scared that I will be unable to make it?

Go under debt review (debt counselling) at Meerkat. 

benefits of debt counselling

What is debt review or debt counselling?

Debt counselling, also known as debt review, is a debt relief measure that was introduced by The National Credit Act (NCA). It is a nationally regulated process by The National Credit Regulator (NCR). This means all the processes and fees are regulated. 

Read: What is debt review in South Africa?

How does debt review work in South Africa?

Once you've applied for debt counselling, a Debt Counsellor will first determine if you are over-indebted. If you are, you will then be placed under debt review. 

The Debt Counsellor will work out a new repayment plan for you so that you are in a better position to pay for ALL your debt. This can mean reducing your monthly debt instalment by up to 50%! This is done by negotiating with your creditors on your behalf to reduce the interest rates on your loans. This could even end up saving you money on your total debt amount. 

When you are under debt review, you also only pay one monthly instalment instead of the several instalments you are currently paying. 

Let’s chat about it! We’ll contact you. 

Contact me about debt review >>

How do I return a financed car in South Africa?

Selling your vehicle:

You can’t really 'return a car', but you could sell the car or trade it in. You could then use that money to pay up the outstanding amount on your loan. 

Can I restructure my car loan?

To improve your financial situation, you could reduce your car instalment by approaching the vehicle financing company and asking them about your options. Depending on the company, they could suggest paying off your loan by:

  • Extending the terms of your loan. This could result in a reduced monthly instalment.
  • Offering to let you pay a reduced instalment for a few months and then getting back to paying the full instalment when you’re in a better financial space. 

If you can’t afford a car, but need one, you may have heard about the rent-to-buy option. Want to know more? 

Read: The comprehensive guide to rent-to-own cars 

Can you refinance your car loan?

Refinancing your car loan is another option to consider when looking to improve your financial situation. By refinancing, you can potentially lower your monthly payments and save money in the long run.

How does refinancing a car work in South Africa?

To refinance your car loan, you would need to take out a new loan to replace your current one. This new loan would pay off your existing loan and provide you with a new loan agreement. The new loan would ideally have a lower interest rate, resulting in reduced monthly payments.

Before deciding to refinance, it's important to carefully evaluate the terms and conditions of the new loan. Consider factors such as the interest rate, loan duration, and any additional fees or charges.

Refinancing can be a beneficial option if you're struggling to meet your current car loan payments or if you're looking to save money in the long term. However, it's essential to assess your financial situation and determine if refinancing is the right choice for you.

Remember, refinancing your car loan may extend the duration of your loan, which means you'll be making payments for a longer period of time. It's crucial to weigh the pros and cons and consider your long-term financial goals before making a decision.

Some advantages could include:

  • Getting a loan with a lower interest rate.
  • Reducing the capital amount of the loan, which could end up saving you money in the long-run.
  • Being able to improve cash-flow or actually afford the car repayment.

If you can no longer afford to make your car payment, it's important to research all your options. By taking proactive steps and considering these alternatives, you can find a solution that suits your needs and helps you achieve financial stability again!

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