We’ve all had up and downs in our lives that has affected us financially and sometimes to the point where your motorcycle falls behind in payments and before you know it, there is a repossession notice.
Believe it or not a fair number of repossessions can be avoided and are often as a result of an oversight. As an example, you purchase a motorcycle without a warranty, times are tough, so you skip a service, the engine fails causing R50k damage or you have a warranty and you rev your engine to limiter with the bike stationary and the engine breaks and you are stuck with a massive repair bill. Now you’re paying for a bike that you can’t use and because times are tight it ends up being the last payment you make, and the bike is repossessed. The bank sells it to the highest bidder and you are held liable for the balance.
Another example I have witnessed on a few occasions is that when times are tough, insurance payments are skipped and as luck would have It, the bike is written off or stolen and again you are left with an instalment, insurance payment and a bike you can’t use or afford to fix. Ultimately the bike either ends up getting repossessed or the bank issues you with a notice to terminate the agreement and institutes proceedings against you, unless you can settle in full. It is important to note that if you cancel your insurance, the insurer will normally inform the bank.
It is my opinion that if you are experiencing financial difficulty rather sell your motorcycle if financed and settle the bank before you find yourself in one of the above situations. If you are unable to sell your bike here some options available which you may find useful:
- Debt Counselling: You may approach the bank before they institute action against you and the bank will endeavour to help you. The bank may appoint a debt counsellor who will work with you to avoid a repossession – In both cases your credit record will be affected but at least the bank will have the view that you attempted to resolve or pay the outstanding amount.
- Take-a-Break: If your contract is older than 12 months and is up to date you may take a break for one month. Check that your bank offers this facility as not all banks do.
- Voluntary Surrender: You may at anytime terminate the agreement with the bank by giving them written notice and request the bank to sell the motorcycle (normally on auction) and they will either credit or debit your account. If you still owe the bank money after the sale, they will demand final payment – Although I do not suggest this route as you will receive a negative credit rating, you will no longer have to worry about insurance premiums and maintenance costs.
- Experienced Dealer Buy-Out: Experienced dealers will have the knowledge on how to purchase your motorcycle for the highest possible amount (without the risk of auction) and will assist you in negotiating the balance payable in terms of a new loan with the bank. This is the best of the bunch, as the bank sees you making an effort to repay the loan. Once the bike is sold, you no longer worry about insurance and maintenance costs and you can put these amounts towards settling the loan.
Explore every option before your bike is repossessed as your credit rating really takes the worst possible hammering. Ensure that you have a warranty for that rainy day and reputable insurance cover not just the cheapest. If you can sell your bike to a dealer, ensure that they settle the bank before you leave the store therefore avoiding the motorcycle being settled late and possibly handed over to the legal department
Please note that this information is for educational purposes only, and as always, please seek professional financial and/or legal advice before making any decision.