Before you sign
Finance deals for cars can vary significantly. Many traders can help you arrange finance, but it may be in your interest to shop around and check rates and fees offered by banks, credit unions and other finance providers.
It is important that you make the contract of sale conditional upon finance approval.
Read the finance agreement carefully and make sure you understand it. Ensure you are aware of:
- all fees and interest rates
- repayment rates and due dates for payment
- the total amount you will have paid at the end of the loan period
- all insurance requirements.
Your rights and responsibilities
Providers must inform you of your rights and responsibilities before you enter into a credit arrangement with them. They must provide all relevant information including interest rates, fees and commission, in a written contract.
The Consumer Credit Code, which applies to most consumer finance transactions, sets out your rights in this and other respects.
What if you cannot pay off your loan?
Consumer credit insurance or loan protection insurance can cover you if you are unable to make your loan repayments because of illness or unemployment. However, this sort of insurance can be expensive.
Shop around for the best deal and make sure you understand any limitations on the cover period.
If you are finding it difficult to repay your loan, you could ask your credit provider for a hardship variation. This can involve postponing your repayments or seeking a reduction in instalments.
Consumer Affairs Victoria can help you in negotiating a hardship variation. More information about how to request a hardship variation, including sample letters, can be found at the MoneyHelp website.
If your credit provider turns down your application for a hardship variation, and your credit contract is covered by the Consumer Credit Code, you can apply to the Victorian Civil and Administrative Tribunal (VCAT) to have that decision reviewed.
Some loan arrangements may ask you to put up your property as security. If you do so and are unable to repay your loan, enforcement action may lead to the property being taken by the credit provider. If the car itself is the security, it can be repossessed. It can also be sold for less than you owe, and you can end up owing your credit provider the difference.
The Consumer Credit Code sets out notice and other requirements the credit provide must follow if it wants to enforce the loan.
Written off vehicles
If your vehicle is written off, you will still need to pay the balance owing on your loan. Gap or shortfall insurance, offered by some financial service providers, can cover the difference between the insurance payout and the balance owing on the loan.