Breaking Finance Agreement: What You Need to Know When It Comes to Your Car
Buying a car on finance can be a convenient way to purchase a vehicle, but it can also be a significant financial burden. If you`re struggling to make your payments, or you`re considering breaking your finance agreement for any reason, it`s important to understand the implications. In this article, we`ll take a closer look at what breaking a finance agreement means and what you need to know when it comes to your car.
What does breaking a finance agreement mean?
Breaking a finance agreement simply refers to ending an agreement before the end of its term. This can occur for several reasons, such as personal or financial difficulties, a change in circumstances, or even a desire to upgrade to a new car. However, it`s essential to be aware that breaking an agreement can come at a significant cost.
When it comes to car finance, breaking an agreement means that you need to settle the outstanding balance on the loan. This can be a substantial sum, especially if you`re breaking the agreement early into the term. In addition to the outstanding balance, you may also be subject to early termination fees, which can make breaking the agreement even more expensive.
What are your options if you want to break your finance agreement?
If you`re considering breaking your finance agreement for any reason, it`s essential to explore your options. Here are some of the steps you can take:
1. Speak to your lender – The first step is to speak with your lender. Explain your situation and see if they can offer any solutions, such as restructuring your payments or deferring them for a short period.
2. Consider a voluntary termination – If you`ve already made at least half of the total payments on your finance agreement, you may be able to terminate the agreement voluntarily. This allows you to return the car to the lender and walk away from the agreement. However, you`ll still be responsible for any outstanding payments and fees.
3. Sell the car – Another option is to sell the car privately or to a dealership. If the car is worth more than the outstanding balance on the loan, you can use the proceeds of the sale to pay off the loan in full.
What are the consequences of breaking a finance agreement?
Breaking a finance agreement can have several consequences, including:
1. Damage to your credit score – If you default on your finance agreement, it can have a negative impact on your credit score. This can make it difficult to obtain credit in the future.
2. Legal action – If you`re unable to settle the outstanding balance on the loan, your lender may take legal action against you.
3. Difficulty obtaining finance in the future – If you`ve previously defaulted on a finance agreement, it can make it difficult to obtain credit in the future, including for a new car.
Breaking a finance agreement can be a difficult decision, but if it`s necessary, it`s essential to understand the implications. If you`re struggling to make your payments or need to change your vehicle, speak with your lender and explore your options. Remember, breaking an agreement can come at a significant cost, so weigh the pros and cons before making a decision.