Can I renegotiate my car repayments?

2012-09-29 11:54

Letters from our readers this month highlight the need to understand the interest rate on your loan.

Make sure you always understand exactly how much your debt is costing you, not only your monthly repayments but how much you will pay over the whole period of the loan.

It is also important to make informed decisions about whether or not to fix your interest rate

Simon writes:

In 2009 I bought a car that cost me R114?000.

It was the first time that I bought through a bank and I didn’t ask about interest rates on whether to go for a fixed or variable rate. I ended up taking a fixed interest rate of 17.5% a year with Nedbank.

Recently, a friend told me that I was paying way too much on interest and that I should be paying closer to 10.5% or 13.5%.

I have 25 instalments remaining and I want to know if it is possible to change from my fixed interest loan, or should I go to another bank for a loan?

Maya replies:

I always recommend that you go to your own bank first.

A bank would rather have the opportunity to retain a customer than to lose him or her to another bank,  especially if a customer has been a good one and has paid on time.

In this case, Nedbank was prepared to negotiate.

Douw Leadley, executive head of sales and operation at MFC, a division of Nedbank, explains that at the time of Simon’s application, interest rates were high, with uncertainty about the future direction of interest rates.

“To protect themselves against possible increases, as in Simon’s case, clients chose rates that were fixed to the prevailing repo/prime rate, plus a reasonable margin.

“Therefore, should rates have increased further, Simon would have benefited from the arrangement,” says Leadley.

However, due to the financial crisis, interest rates have actually fallen to their lowest level in 30 years and Simon is paying well above market rates.

As Simon is a good customer, Nedbank agreed to a new arrangement at a lower interest rate.

“The client has been contacted with the resolution. He has expressed great satisfaction.

“In line with the bank’s client services processes, a follow-up consultation will be done to ensure his satisfaction,” says Leadley.

If you are able to benefit from a lower rate, rather than reducing your instalments, keep up with the original payments and pay off the loan over a shorter period of time to save on interest costs.

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