South Africa is currently in tough financial space, both publicly and privately. On a consumer level, South Africans are battling with increasing prices and flat-lined salaries. Households are struggling more than ever to make it through the month on their current income. The result of such circumstances is an increased reliance on debt and for many, missed car repayments.
South Africans Are Missing Their Car Repayments
There has been a recent trend in consumers defaulting on vehicle asset finance agreements. Home loans and vehicles are usually paid first, due to there being something to lose.
As reported by Moneyweb, Carmen Williams, director of research and consulting at TransUnion says:
What we are seeing from a secure perspective is that, and with vehicle finance specifically, we’ve seen over the last two years that there has been a persistent and consistent increase in serious-level of delinquencies over the last two years when it comes to vehicle and asset finance. In fact, that particular product has been increasing incrementally in delinquency rates over the last nine quarters.
Not All Debt Is Bad
Broadly speaking, debt can be broken down into two types – good and bad. Good debt is debt that is used to create wealth. Assets, such as properties and vehicles are classified as good debts. Properties can increase in value and can be used by business to generate wealth. Vehicles are a mode of transport used to get to work to make money. Loans can be used to start a business, which, if successful, can generate wealth.
Unsecured debt used for consumption or luxurious spending is typically seen as bad debt. This type of spending does not create value or wealth, but rather depletes it. Personal loan, credit cards, overdrafts and payday loans are expensive and increase the cost of whatever they purchased.
What Happens If I Miss My Debt Repayments?
Missing any debt repayments will have negative consequences. A credit score is linked to payment behaviour. Missing debt repayments will reduce the credit score.
Once a payments is missed, credit providers will call and SMS the defaulter, however, after a few months of missed payments, creditors can start initiating legal action.
If too many home and car repayments are missed, creditors can repossess the assets. Assets are sold to get the principle debt paid off. This can have a devastating effect on a individual and their family. Repossession a vehicle or home can be a traumatic experience.
If you have missed or are about to miss any debt repayments, you should seek help as soon as possible. Speak to Vantage Debt Management today for a free financial assessment and sound advice.