15 Jul Can You Pawn Your Car While Under Debt Review?
If you’re under debt review and money is getting tight, you may wonder whether you can pawn your car. The answer is yes, you can pawn your car, but we strongly advise against it. It can have treacherous consequences on your standing with the Magistrates court, current creditors, debt counsellor (especially if you don’t tell them) and the bureaus.
This blog discusses how pawning your car while under debt review could wreak havoc on your life. It also discusses how to stay safe, and what to watch for.
Is Pawning My Car Under Debt Review Legal?
Yes, it is legal, but there are some crucial caveats you should consider:
It MUST Be Paid Off
You can’t pawn your car under debt review if you owe money on it.
Your Car Won’t Be Protected
True, debt review shields you from repossession from creditors—but not those of pawn transactions.
The Grey Area
While you can pawn your car under debt review, it’s important to remember that under the National Credit Act, taking out new credit under debt review is illegal.
The section entitled Effect of debt review or re-arrangement order or agreement, section 88(1) says “A consumer who has filed an application in terms of section 86( l), or who has 30 alleged in court that the consumer is over-indebted, must not incur any further charges under a credit facility or enter into any further credit agreement, other than a consolidation agreement, with any credit provider,” until:
- Your application for debt review is rejected
- The court rejects your debt review application
- Your debt obligations are fulfilled
That is unless you’re fulfilling your debts under a consolidation agreement. Take note that pawning your car could technically be construed as taking out new credit and thereby disregarding South African law, which could come back to bite you if the Magistrate Court should have to fend for you if something goes wrong.
How to Stay Safe When Pawning
Pawning is inherently dangerous and we do not recommend it, especially under debt review. If you absolutely insist on pawning your car under debt review, here are some ways to stay safe and do it lawfully.
Do Your Research
Even if you’re desperate for the money, choose a pawn shop that won’t negatively affect you down the line. Look for pawn shops that have long been established, have positive customer reviews (you should be able to find them as a Google business), and with a physical address. Online-only lenders are almost always scams.
Clearly Outlined Terms
Your pawn shop of choice should clearly explain its terms, outlining interest, fees, and repayment schedule before you sign anything. Also, be sure to read everything before you sign it, making sure that you carefully review all the terms. Remember that a contract is legally binding and that if you fail to make payments your creditor will take away your car.
Why Pawning Your Car Is A Bad Idea
A lot of pawn shops carry out pawn-and-drive schemes. This means they do their best to ensure you don’t get your car back by:
- Requiring that you hand over ownership
- Charging high interest rates and fees
- Hiding fees, using misleading terms, or pressuring you into a bad deal.
Remember, pawn shops’ goals are to repossess your car so they can make a higher turnover. It should be a last resort.
If you are in serious debt and need help, consider debt counselling and contacting DebtCo Group. Let’s find a way out, together.
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