Buying a bike is an exciting experience. But taking out a bike loan needs your full attention. You need to be fully across the detail and understand all possible outcomes and implications especially if you miss a payment – that is, if you default on your loan.
As your finance broker, Jade Bike Loans is required by law to provide you with specific information on consumer loans under the National Consumer Credit Protection Act and your consultant will explain all aspects of your bike loan offer.
A key issue is around loan defaults and late payments – what happens if you miss a payment or several payments.
We address 5 key questions in this article around bike loan defaults.
What is a bike loan default?
To default on your bike loan means to miss repayments for 60 days. Defaulting on payments also applies to credit cards, your mobile bill, power bill and other loans and provider bills.
Missed payments which are rectified in 14 days are considered Late Payments and still attract a fee and may impact your credit score.
Your Jade Bike Loans consultant will have arranged your bike loan with equal monthly repayments which are due for payment on a set date each month.
If you do not make a payment by the due date for more than 60 days, it becomes a loan default. How each lender addresses loan defaults will depend on their individual guidelines but there are guidelines and protocols under consumer law.
If you make the payment after the due date, eg a few days later and within 14 days, this would be classified as a Late Payment. 60 days is the timeframe nominated to trigger loan default.
Loan defaults which are not rectified by the borrower can attract action from the lender and serious implications for the borrower.
How does a loan default work?
- Most loan repayments are set up as an automatic direct debit from the borrower’s nominated bank account.
- In the process of arranging your bike loan, your Jade consultant will have you complete a form which gives the lender authority to deduct the fixed amount of your bike repayment on the set date each month from your account.
- A default occurs when the lender attempts to deduct the funds from your account and there are insufficient funds in the account to cover the repayment and the monies are not paid for 60 days.
- It is the borrower’s responsibility to ensure the required funds are in their account on the set date each month.
- If you change your bank account, it is the borrower’s responsibility to advise a lender of the change and set up a new direct debit authority.
- Lenders must report defaults and late payments via the Credit Reporting System and the default will be noted on your Credit Report and this may have negative impacts on your prospects for securing credit in the future.
What happens with a loan default?
The end game to a default is – with a Secured Bike Loan which is the most commonly used type of loan for motorcycle purchases, you agree that you offer the motorbike as security against the loan. In doing so, the lender has the right to repossess the bike if you default on your loan payments.
The short game – if you rectify the default promptly by depositing the correct amount in the bank account, contacting the lender to discuss and have the monies debited, you may be charged a late payment fee.
Default fees for bike loans will vary from lender to lender. When arranging your Jade bike loan your consultant will advise of these fees. For an idea of how much these fees are, you can check a bank website and they usually itemise all fees associated with loans.
The lender will likely contact you relatively immediately after you have missed a payment and may suggest a range of actions that you can take to rectify the situation. DON’T IGNORE THESE MESSAGES – ACT QUICKLY AND GET IT SORTED!
The lender will report the default and it will appear on your Credit Report and impact your Credit Score.
If I default, will I have my bike repossessed?
In short, yes, that is possible.
As noted above, a Secured Bike Loan provides the motorcycle as security against the loan. If you miss your payments, the lender is well within their rights, after following the credit law protocols, to repossess your bike to recover the money you ow.
Tips to Avoid Loan Defaults
- The most important issue to avoid missing your bike repayments and defaulting on your loan, is to ensure you have the required amount of money in your account on the set date every month.
- Watch your spending so your bank balance doesn’t dip below the repayment amount.
- If you are experiencing financial problems and/or your circumstances or your bank account details have changed, contact your lender to discuss the options.
- If you have ongoing financial challenges, you may choose to consult with a professional financial advisor for direction and advice.
Loan defaults are an important matter as the risk involves the possibility of having your bike repossessed and impacting your credit score.
The simplest way to avoid defaulting on your bike loan is to ensure you have sufficient funds in your nominated account on the date each month that the repayment is due.
For more information on motorbike loans, read more of our articles or speak with a Jade Bike Loans consultant 1300 000 003