Tips for navigating bank repossessions
Association gives advice
Repossession can be an incredibly distressing experience, says the Banker's Association of Namibia, stressing that effective communication with your financial institution is a powerful tool.
A financial downturn has many negative effects, with perhaps the most distressing for consumers being the repossession of an asset. Whether it's your trusted car that transports your family around, or your house that you call home, repossession can be an incredibly distressing experience.
“For those consumers who are unable to meet their vehicle and home loan obligations, the repercussions can extend far beyond the immediate and devastating stress,” says chief executive officer (CEO) of the Banker’s Association of Namibia (BAN), Brian Katjaerua.
“Legal proceedings, a detrimental impact on your credit scores, and the loss of your most prized possessions are all grave consequences facing consumers in this position. It is therefore crucial for you to explore avenues that could offer reprieve and assistance in navigating these challenging circumstances,” Katjaerua adds.
Ownership
Under all loan financing agreements, the asset, be it a vehicle or home, remains the property of the bank in principle until such time as the loan is fully paid off.
Alhough the asset may be registered in the individual’s name, the bank – not the individual – is in principle the titleholder and legally remains secured by the asset until the final instalment has been paid. This gives the bank the legal right to repossess the asset should the consumer not honour the loan repayments.
“Missing one payment will not lead to repossession, but it does increase the risk,” Katjaerua says.
“What is crucial is that you speak to your bank and make arrangements to catch up on the missed payments as soon as possible, but understand that missing payments is not encouraged,” he stresses.
Communication
Proactive measures are key, and if consumers are unable to meet their vehicle or home loan obligations, they are urged to contact their bank.
This will allow for a conversation that can potentially mitigate the impact and provide an opportunity for both parties to work towards a solution.
Avoid legal action
Consumers could proactively approach their bank and negotiate viable repayment options in order to avoid legal action being taken against them.
However, this step requires various and plausible factors to be considered, such as the core reasons for missing payments and what the consumer proposes to avoid legal action and loss of property.
“It is important to know that before instituting legal action, a bank will normally first exhaust all its options in an attempt to collect the arrears. This could include granting a consumer enough time to meet their repayment obligations in deserving cases” says Katjaerua.
“It is important to know that by defaulting on your payments there are many negative domino consequences. Not only will it have a negative impact on your credit report, but it may also mean limited access credit in the future,” he adds.
Taking charge
Take charge of your financial wellness with the following steps:
• Draw up a budget that realistically accounts for your loan repayments. Prioritise your expenses and reduce non-essential costs to ensure you have enough money to meet your monthly obligations.
• Consult with a certified financial planner to assist you – they are trained to analyse your current financial situation, help you identify areas to cut costs, and formulate a strategy to get out of debt. Their services may be free of charge for an initial consultation.
• Approach your bank about the possibility of restructuring your loan or establishing a temporary payment plan. This can help alleviate your financial stress and give you the much-needed time to catch up on missed payments.
“Effective communication plays a pivotal role in the avoidance of repossession, as banks are generally open to collaborating with consumers to achieve a positive resolution,” Katjaerua says.
“On the other hand, it is important for consumers to understand the gravity of neglecting their loan payments. Consumers must also note that repossessions are the least preferred options for banks as this does not always result in a bank being fully repaid for the outstanding debt, while the consumer may also have a balance still to be repaid after the sale in execution of the property,” he concludes.