How to buy a car if you are blacklisted

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kingr
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How to buy a car if you are blacklisted

Post by kingr »

The term “blacklisted” carries far too much weight, at least in South Africa. Being ”blacklisted” simply means that credit providers are applying a broad term for someone whose credit rating isn’t the best. Many of us find that we’re disqualified for finance when out shopping to buy our next car. It’s not a terminal situation, and doesn’t have to be the end of your dreams of owning a car. Even if you are blacklisted to whatever extent, options to finance a used or new car remain open.

Blacklisting is usually due to missed payments, long-forgotten accounts or judgments against your name. Very often, recently missed payments can still be easily resolved, if the debt is still on the company’s books and hasn’t yet been handed over for collection. Even if it has, most parties are amenable to clearing your name promptly if the debt is settled. The same applies to long-forgotten bills you might even have no knowledge of, such as an undelivered anaesthesiologist’s bill or a missed demand-debit that bounced years ago. These can also be undone upon settlement, but might be more protracted and convoluted, simply because time has passed and parties need to backtrack.

Finally, judgments against your name are the most difficult to clear quickly and there is a residual period, only after which you might be eligible for financing or credit again. Blacklisting is thus a nuanced term and no matter your position, there are always options to buying a car.


KNOW YOUR CREDIT RATING

If you suspect or have been told that you have a bad credit rating and cannot get credit, as a South African citizen you are entitled to a free credit report from every credit rating agency in the land, every year. There are sites where you can get your limited but valid free report, which draws on intel from all agencies. Avoid scammy sites like https://www.mycreditcheck.co.za/ that promise a free, collated report but actually give an almost useless snapshot, and rather buzz Transunion ITC, XDS, Compuscan and Experian to get a free report from individual agencies. It’s a process to buzz them all, but it rounds out the picture you can glean of yourself as a consumer, vetted by credit providers.

Once you know your status, you can set about rectifying it as needs be, assuming it’s inhibiting you obtaining credit. There are a few reasons why you might suffer a poor credit rating.


3 Reasons why you are blacklisted

1. Account arrears
Arrears happen when you either knowingly or unknowingly miss payments on any regular account. Providing no other legal action has been taken against you, merely paying in what’s owed will see the swift spring-cleaning of your credit profile, in liaison with the store or other entity that offered you the account. If you have a number of accounts in arrears, it’s reasonable business to make payment arrangements with them you can afford. No further action will be taken, but you’ll have to finalise all payments and wait until you do before applying for car finance.

In an unmanageable scenario where you realise that there are simply too many bills to pay, you can approach the National Debt Mediation Association to help in negotiating the terms of account settlement with creditors. After addressing all account arrears, you might still be seen as a higher risk when applying for finance, but you can apply, or allow between three and six months to pass whereupon your profile will be wholly creditworthy again. The reason you might want to wait is that credit providers may very well extend credit to you immediately thereafter, but charge you the maximum interest possible, as you are still seen as higher risk than cleaner profiles. It’s worth asking and comparing to avoid being penalised for being in a hurry.

2. Being “In Default”
This is another upshot of missed payments, and the term usually implies that attorneys have been or still are in pursuit of settlement of your debt. The terms “written off” and “handed over” carry the same implication, that the company has sold the debt onto collectors such as attorneys and other registered agencies.

Settling your debt via the agency is usually swift and can be completed in a single phone call, in part because the debt collector has now added their fees and will be smiling with every easy collection. If your debt is marked “written off” and the company made no further efforts to sell it on or otherwise collect it, it may be necessary to speak to that sweet lady in accounts and find out if you can pay them directly and address the debt.

Typically, depending on the size of the company and its policies, debts like this will remain “written off” and, with enough begging and pleading (and the offer to settle), the smear will be erased from your profile without payment, as the debt is now accounted for in the company’s books. This scenario does occur, but more usually an agency owns the debt, and they will have to be settled before your name can be cleared, allowing you to buy a car.

If you settle debt with an agency or even the original credit provider, ask them for a paid-up letter confirming that you have settled the debt. The onus is on you to submit this to credit bureaux that, by law, have 20 days to update your profile. The information will stay there for up to two years as a matter of record, but won’t impact your ability to obtain credit, although you won’t be getting any preferential interest rates either.

3. Judgments against your name
No, Judge Dredd doesn’t come around and kill you, but these are the most unwelcome marks to have against your name at credit bureaux. Once a judgement has been granted, clearing your name involves a long and convoluted process. You might be able to settle the debt, pay for a rescission of judgment in liaison with the credit provider and eventually at least undo the rating on your profile. It won’t help you obtain credit over the short term, however.

High Court and Magistrates Court judgments are noted on your profile and, since High Court judgments usually stem from debts in excess of R100,000, you are likely to remain uncreditworthy for all intents and purposes. Credit providers see judgments and particularly High Court judgments as the highest risk, and you’ll probably need to look at alternatives when buying a car other than financing it, if your credit report contains judgments. A lot more weight is attributed to judgments in these matters, and the residue lasts a lot longer.

How can I buy a car if I’m blacklisted?

If settling debts isn’t an option but the need for a car remains imperative, there are a number of ways to go about buying a car anyway.

1. Buy a car for cash
It might take some discipline, but saving up and paying cash is a commonsense and untroubled route to buying a car when blacklisted. Be brutally realistic about what you can save and thus afford, as chances are you were tight to begin with and thus accrued that bad debt in the first place. If you can be honest about your ability to save, amounts and time lines, you may be one of the many disciplined souls who can simply save up and buy a car outright.

2. Dealership negotiations
In-house finance is a common offer from various car dealerships in modern South Africa, and this reality can sometimes be tweaked to your advantage too. At the outset, you should know that dealership interest rates will be typically higher than Wesbank or other traditional financers’ rates. On the plus side, a dealership often focuses on legitimate affordability, looking less at a credit score. If you earn enough to afford the car you want to buy, the dealership might be able to finance the deal for you.

In a situation where bad debt results from a car purchase, the dealership might well also be open to settling that debt, assuming it’s relatively little in comparison to the purchase price of the car you want. They will then add that amount to the repayments, bumping up your monthly payments, but freeing you of your ineligibility for finance. Note that dealerships are not obliged to extend you in-house finance, nor certainly to absorb your previous debts, but it remains a possibility to discuss. Going this route holds another benefit, if you can arrange it. The regular payments on your newly financed car will also be recorded as such, lifting your profile’s status over time.

3. Rent-to-own or leasing a car
Many rent-to-buy offers can be found nowadays, where the law tolerates what amounts to financing a vehicle by surcharging you renting it. What this means is, in a nutshell, that you are “renting” a car but paying in a manner where both parties agree that at the end of the lease term, either combined with a final payment or not, the car becomes yours.

It sounds great, but there is almost always an upfront “deposit” that is several thousand if not several dozen thousand rand. Although termed a “deposit,” upon questioning the company, you’ll realise that the “deposit” doesn’t go towards the cost of the car, but is merely an upfront admin fee. As obnoxious as this is - being hit when you’re down - many do opt for this route, as it’s the closest thing to financing available to those blacklisted in some way.

EarnACar, BlackListedCarFinance and NoFinanceCars are examples of companies extending this offer to South Africans. Requirements are typically that you earn a minimum R12,000 a month, have a valid driver’s license and that you pay off over a 54 -month period, without hiccups. Make sure you read the fine print. Twice.

4. Alternative Financiers
South African microlenders abound, and these companies can also asses you and extend credit, providing doing so doesn’t flout the law. When out to buy a car, financing the vehicle is not precluded from a microlender’s abilities. Although it might not be termed “vehicle finance,” they could loan you an amount that covers a car purchase. Affordability is also weighed in sooner and heavier with microlenders.

You can encounter different ranking protocols here, so there is a chance that among them all you might qualify for finance. It’s laborious wading through all of the marketing promises and actually getting the truth from myriad agencies, but it might be your only viable route if you’re blacklisted and haven’t the cash to buy a car outright.

Blacklisted car financing in a nutshell

You can’t qualify for credit if you are under debt counselling, review or administration. Most microlenders share traditional sector concerns about judgments, and you’ll need a strong heart to walk down all of the potential financing avenues when you have judgments against your name. The fraternity is, however, less clinical than the banking fraternity, and will make more effort at times to get you legally financed.

There’s a reason for this - they’ll make good money out of you if they can facilitate financing you. When dealing with microlenders, read the fine print, three times. Although the law governs allowable interest percentages and other aspects of credit, you ought to know if you’re going to be paying the maximum all round, as perhaps there’s a better offer to be found.

No matter what route you end up pursuing, it remains your best bet to settle existing debts - even slowly - and always to maintain a clean credit record. This just opens up the scope of cars you can look at, and makes your future motoring that much grander.
Kurt #3337

Current:
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