QUESTION: I got a 100% financed loan to purchase a new car in 2014. Several months afterwards, I lost my job and the vehicle was repossessed. A few weeks ago I got a letter from a collection agency that I owed more than the money that I borrowed and that I needed to pay in short order, or else. Please advise me accordingly.

– Peter

 

FINANCIAL ADVISER: My advice is that you should immediately contact the collection agency and arrive at a plan for paying your debt, or else you could face more serious action, such as legal action being taken against you by the lender.

The reason you now owe more than you borrowed is due to the interest that has accrued over the many years since you took out the loan.

Consider also that, in the early years, most of the money you pay goes to interest so there is usually little downward movement in the principal sum outstanding. As such, an interruption in the servicing of the debt may lead to the principal sum outstanding exceeding the sum borrowed as the interest not paid is generally added to the principal, and it is also possible there could be penalty charges.

I am trying to understand why the collection agency has just made contact with you. Is it that you were somehow out of reach? Did the lender not make contact with you all these years, and what about you? Did you make contact, or did you believe it would just go away?

Have you remained unemployed since the several months after you borrowed the money? There are quite a few gaps in the information you have provided. And I am wondering if the lender has sold the car since the repossession. In any event, if the sale proceeds were less than the principal sum outstanding, I believe you would still be indebted to the lender for the difference.

https://jamaica-gleaner.com/article/business/20210401/oran-hall-deep-trouble-over-motor-car-loan