Default and ending agreements
Ending agreements early
A borrower can pay out a credit contract at any time and ask for a detailed statement about the payout figure. Note, early pay out charges are only valid if they are in the contract and are part of the pre-disclosure. Check also to see whether the charges are unconscionable.
When is there a payments default?
The most likely reason that there has been a default under the contract is because a payment has not been made. Where a mortgage (security) is held over goods (usually a car), other reasons may include:
- the borrower fails to maintain insurance;
- the borrower sells the goods;
- the borrower otherwise disposes of the goods;
- the borrower transfers the ownership to another person.
This term generally means an action that is initiated in court.
The credit provider cannot take legal proceedings or any other enforcement action until the borrower is given a notice and the default continues for at least 30 days after. The date of service of the notice. The notice does not have to be given in some circumstances, eg fraud.
The notice must specify specific information in most situations. Get legal advice if proceedings have been instituted.
It is possible to seek an extension on the loan repayments if you are in default, but it is best to have a reasonable excuse. Negotiation is often a good starting point. For instance, if you were unemployed for a period of time but are now in a position to make the repayments, this might allow an extension to be provided. Where larger sums are involved, it is important to get legal advice.
Do not agree to a proposal to refinance without getting professional advice from an accountant, lawyer or specialist legal centre/financial adviser.
Last Updated – June 2012
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This fact sheet is intended to be general information about the law in Australia. It is not a substitute for legal or other professional advice. Lawscape Communications Pty Ltd and Fairfax Digital Ltd do not accept responsibility for loss to any person, who either acts or does not act because of this fact sheet. Last Updated - October 2005