Question:
I currently owe R80 000 for my car. Does it make sense to take R80 000 from my access bond and pay off my car? I could then use the money I’m paying on my car to increase my home loan payment. Will this work out to one and the same?

Answer:
Yes this does make sense, because the chances are that the interest rate on your home loan is a few percentage points lower than your car loan.

So let's say for example that your home loan is R600,000 and your rate is 14.5 percent and your car loan is at 16.5 percent, so you will save two percent. This two percent translates into a saving of R5000 in interest payments! It is critical however that you do pay that car payment into your bond each and every month, otherwise you will achieve the opposite and end up paying more in interest.

Question:
What happens when my car gets repossessed, in terms of financial implications?

Answer:
It is not a good idea to allow your car to be repossessed, and financial institutions take a very dim view of this. You will get a negative listing at the credit bureau and you may be prohibited from getting finance for five years.

You also run the risk of them selling the car for less than what you owe, and then you would still be held liable for the shortfall. It would be a better option for you to sell the car yourself for as much as possible and settle the debt with the bank. If there is a shortfall you may have to pay in some cash to cancel the deal.

People rarely come out on top when they are forced to sell a car for lack of affordability. If your financial problems are short term ask the bank to reschedule the debt over a longer period. This will reduce your payments but you will have to pay a higher interest amount in the long term. When you get back on your feet you can start paying in more money to try and reduce the interest charges