Car Loans

Hire Purchase loans are usually secured against the item the loan is used to purchase (in this case a car) and a loan company is entitled to ask for that item back. However, in many cases, loan companies are not able to reclaim the item if a certain percentage of the loan has already been repaid. This can be anything between 25% to 50%, so check your credit agreement. If this percentage of the payments have been made, the Hire Purchase company will need a court order to repossess the vehicle and they will need to issue you with a notice before they start court proceedings.

If You've Reached the Minimum Percentage

If you have already reached the specified percentage, write to the finance company, enclosing a copy of your financial statement, and offer a revised repayment schedule of whatever you have demonstrated you can afford, even if it is only a fraction of the originally agreed amount.

Ensure that you ask the company to freeze the interest rate, as there is no point making monthly repayments when the amount outstanding continues to increase. If they refuse, then pay nothing. Any court action they take will result in a judgement that will freeze the interest rate and you will not be ordered to pay more than you can reasonably afford on a monthly basis.

Then, in a year's time, you might want to write offering a full and final payment to settle the account, even if this is only a small percentage of the outstanding amount. Many finance companies will agree to such arrangements in order to clear a debt from their books.