What happens when a lender goes bust?

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rayonline

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Topic # 229237 14-Feb-2018 09:57

Just curious to know. I have worked with people who just puts things on hire purchase cos they have a job etc ... like a phone, holidays, cars etc. If you are not behind payment they cannot ask you to quickly settle it or that part that is outstanding. If the lender goes bust and there is no willing buyer who would take over that. What happens? Do they drive down the price to sooo cheap that there will be a buyer who will take over that and you make payments to this new entity? Assuming this goes through. What happens when they renegotiate your newer interest rates, can they sky rocket it up?

Cheers.

SaltyNZ

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Reply # 1956825 14-Feb-2018 10:07

If you are not behind payment they cannot ask you to quickly settle it or that part that is outstanding.

Every loan agreement I've signed says they can do that whenever they like for any reason at all. Of course, they generally won't unless you are behind because randomly demanding debts be paid back in full early would be disastrous for people's confidence in you as a lender. I wouldn't think they would use it on very many people even if they were going bust. After all, if you had that cash lying around you wouldn't have gotten a loan in the first place, so all you would be doing is turning nearly all your good customers into instant defaulters in exchange for a small percentage of them being able to immediately pay off the remaining balance.

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trig42

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Reply # 1956905 14-Feb-2018 11:07

No one will take it over (unless there is a guarantor for the contract). The lender will chase it through debt collection. It will affect the credit rating of the buyer, and if large enough, could bankrupt them.

Edit - Ooops - read the OP wrong. Ignore the above.

If the lender goes bust (not the customer), the debts will be taken over by the receiver, who may call them in (depending on the contract) or sell the debt to another lender/collection agency.

surfisup1000

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Reply # 1956908 14-Feb-2018 11:09

The contract might say they can ask you to settle the balance, however that would be a bad thing to do as you cannot easily get money from people who have no ready cash (reason for going HP in the first instance right!).

If the lender did go bust, someone will buy the loan book and extract whatever value might be there. The question is the amount one would pay for the loan book, if it is low quality then you're not going to get much.

From memory, you can buy defaulted loans in the USA quite cheaply. And you can try to collect on them if you feel lucky .

littlehead

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Reply # 1956921 14-Feb-2018 11:31

Remember also, if this is a true Hire Purchase agreement and not just a loan, finance, or interest free term (the term Hire Purchase gets used for a lot of things it is not), then you don't own the product the agreement pertains to until the final payment is made. The product is owned by the "lender". The receiver would have every right to ask for the product back to sell to claim back funds. This is different from a loan or finance agreement where you own the product and there is a security on it.