How to deal with car payment debt in Northern Ireland?

If you’ve purchased a car on finance or you’re leasing it for fixed period of time and you’ve fallen behind with your monthly payments, the repercussions can be serious for your credit rating and, depending on the type of contract you’ve taken out, could result in your car being repossessed.

There are a number of different vehicle finance agreements. A popular one is Personal Contract Purchase (PCP) or Hire Purchase where you don’t actually own the car until you make the final payment. Until that time, you are effectively leasing it and have the option to buy the car outright at the end of term with what is known as a balloon payment. However, if you fall behind with hire purchase payments, your car can be repossessed due to breaking the terms of the agreement.

If you have paid off less than 50% of the hire purchase price, the car finance company can take back the car without taking legal action against you. If you have paid more than 50% of the hire purchase price, a lender cannot repossess the car without taking legal action against you.

If you took out a personal loan to purchase a car outright, you are the owner of the vehicle and not the loan provider. Your contractual agreement has nothing to do with the car; you simply have to repay the loan over the agreed period of time and interest will be applied. You can always ask your lender to increase the loan term to reduce your monthly payments, or could look to sell the car to pay off all or part of the outstanding loan. However, be aware that falling behind with loan repayments will certainly affect your credit rating and interest plus other fees will be added to the balance.

What should always be noted is that your car finance provider, in most cases, will be receptive to your situation so you should always communicate with your lender. Write to them and explain your circumstances – some lenders will reduce payments for a few months to allow you time to get back on your feet.

If you have other debts in addition to your car finance that you are also struggling to afford, you may need to consider entering into a formal insolvency process such as an IVA. This will allow you to deal with all of your outstanding debts by bringing them together under one affordable legally binding agreement.

If you are based in Northern Ireland and are struggling under the weight of mounting debt, we can help you. Contact our specialist team at Northern Ireland Debt Solutions for free, confidential advice.