'Punished for trying to get out of debt when I settled car finance early'

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The cost of living crisis means many people are battling to keep up with their vehicle finance repayments, and every month some have their cars repossessed.

On the other hand, what if through a stroke of luck or clever strategising you're able to settle your car, or home loan early?

Wendy Knowler has a tale of caution around what to be aware of if you're in this fortunate position.

"Did you know that the National Credit Act allows vehicle finance houses to levy an early settlement 'charge' in cases where the original loan was R250 000 and over?"

"The Act has an obscure way of saying that you can be made to pay up to three months’ interest on the loan at the current interest rate."

Wendy Knowler, Consumer Journalist

A consumer who contacted the journalist was thrilled that she and her partner were able to achieve an early settlement on their loan on a brand-new Ford Ranger, through the proceeds of their own hard work.

Then came the discovery that they had to pay an early termination fee of over R4 000, she told Knowler.

"I was gobsmacked as the agent never mentioned this, and nowhere in the termination letter does it mention this fee! So we are punished for trying to get out of debt!”"

Claire

To avoid having to pay that extra few thousand rand, you should give three months’ notice of settling your balance on a car or home loan, Knowler cautions.