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When financing a new car, beware of the balloon payment – this was a lesson learned by a man who lost his legal bid to get his car back after it was repossessed by the bank.
This was, according to him – all because he never realised that after paying off his monthly instalments, there was still a balloon payment due.
When he eventually realised this, he could not afford the additional payment.
Sthembiso Bokleni turned to the Eastern Cape High Court sitting in Grahamstown after Wesbank obtained default judgment against him for not paying the outstanding balloon payment on his car.
He claimed he knew nothing about this extra payment, as this was never explained to him when he got finance for his new car.
Bokleni was very happy when he came to the end of his 59 monthly instalments of R2,637 a month for his VW Polo Comfort line, as agreed with the bank. But in addition to these instalments, the agreement included a balloon payment of R52,148 which was due on the 60 th month.
His problems started when he did not pay this amount and the car was eventually repossessed through a default judgment order.
Bokleni turned to the court to have that order overturned as he claimed he had no idea about the outstanding amount. He said in court papers that after he had paid off his monthly instalments to the bank, without prior notice or warning, the people arrived at his work to repossess the vehicle.
He claimed that he never received a summons or any notification in terms of the National Credit Act and as a result, he was unaware of the outstanding debt.
He told the court that since the bank ceased debiting the monthly instalments, he assumed that there were no outstanding amounts due or payable.
This assumption, he claimed, led him to believe that his obligation under the agreement had been fulfilled. He said the balloon payment was never explained to him.
Bokleni’s attorney later discovered that a summons had been issued against him for the outstanding balloon payment.
His attorney then proposed a payment arrangement with the bank but the bank proposed an amount of R5,269.92 each month, exceeding Bokleni’s offered amount of R2,500.
Bokleni meanwhile ignored his payment obligation and subsequent summons which led to the bank eventually repossessing the vehicle.
He explained that he thought he and the bank could possibly see eye to eye on the further monthly instalment of the balloon payment. He also denied that he ever received the summons.
The bank denied that he did not receive the summons and said following his failure to fulfil the terms and conditions of the balloon payment, it had on multiple occasions told Bokleni that the payment was outstanding and required settlement in full. Thus, it said, he was fully aware of the balloon payment due.
The bank also argued that Bokleni was fully aware of the balloon payment agreement, as it formed part of the contract for finance which he had signed.
The monthly instalments due under the agreement did not provide for the repayment of the balloon payment, which was a separate and distinct obligation under the agreement, it argued.
The court commented that the National Credit Act seeks to strike a balance between the competing interests of consumers and creditors.
It underscores that while the protection of consumer interests is paramount, the Act also recognises that the legitimate interests of creditors warrant equal consideration and safeguarding and cannot be overlooked.
It found the argument that Bokleni was unaware of the balloon payment is without merit.
“The agreement he signed is unequivocal, and its contents are not in dispute. As a responsible consumer, it was incumbent upon him to ensure that arrangements were made to settle the remaining debt after the debit order collection had lapsed,” the court said in turning down the application.
zelda.venter@inl.co.za