End Unaffordable Finance Agreements with a Voluntary Termination Letter

A lot of people might find it unfavourable to pay upfront for purchasing items like vehicles. For that reason, they opt to buy them in finance. Thus, it allows them to pay the full amount in regular instalments. That might make it significantly easier for most buyers, but it also generally means paying a bigger amount than you’d have to pay upfront. Though it can still be worthwhile if you’re able to pay for it. 

Now, that’s what a lot of buyers can’t be sure about. It is quite common for people to find that their financial situation has worsened in the middle of the agreement period. So if you’re facing such a situation, you’re surely not alone. A voluntary termination letter is all that you need to end your contract with the finance company. 

There can be other reasons for doing that too as we shall see. Moreover, you have been given the right to do so under the laws of the UK. You’ll find all the necessary information regarding that right here.

How does a Voluntary Termination Proceed?

Basically, a Voluntary Termination allows you the chance to change your mind about buying a car due to different reasons. The procedure is quite simple and is legally protected. You can return your car and cancel the agreement. Though there are some necessary conditions that you must fulfil in order to avail this. 

A Voluntary Termination applies only to those who have bought a car only on a personal cost plan or on hire-purchase. Also, you must have completed at least half of the payment arrangement. In other words, you are required to have paid at least half of the total amount in instalments. Another very important condition is that the car shouldn’t have any damages except the ones caused by regular use, for example, scratches. If there are, you can still go for Voluntary Termination, though you’ll have to pay some extra charges.

In some cases, you might understandably want to terminate the agreement due to a bad financial situation even though you haven’t paid half of the total amount. In such a case, the only option you’d have to pay is the remaining amount, to complete 50% of the total, which applies to both types of agreements. Only then would Voluntary Termination be applicable to you. So, the thing about this agreement is that it safeguards your interests, as well as those of your financiers.

Why must you go for a Voluntary Termination?

Returning the car is one of the viable options when you’re unable to afford the instalments. Though there are other options as well, you get legally protected rights while dealing with this one. All you have to do is fulfil a few conditions, and you’ll be free of this bad debt. 

Further, if you don’t want to lose your car, you might want to look for other options. An important thing that you must keep in mind is that your finance company or lender can terminate the agreement from their side as well. In that case, you’ll have to pay the full amount that was agreed on. So, if you feel you can’t afford it, it would be better for you to act quickly.

Another very common reason people opt for Voluntary Termination is that they want to get a different car. If you change your mind about the one that you’ve bought, you can simply return it and cancel the agreement, provided that you fulfil the criteria. Since this is your legal right, your finance company won’t be able to stop you from taking this step.

Apart from other reasons, you might want to go for Voluntary Termination when you have to pay more interest to your car than it’s actually worth. This situation is called negative equity, and once again nobody can stop you from terminating the agreement to avoid this.

Will Credit History be impacted by it in any way?

A concern that some people might have while getting a Voluntary Termination is that it’ll affect their credit score. This is understandably serious as it means you might have trouble borrowing money at good rates in the future. 

Do you have such worries in your mind? In that case, you’ll be relieved to know that Voluntary Termination doesn’t have any kind of impact on credit score, whatsoever. If you’ve got information that says otherwise, it is definitely incorrect. Even though it will show on your credit file if you have voluntarily terminated an agreement, it won’t show the reason. As far as money lenders are concerned, you have just exercised a right that is under law. So, they generally don’t take it into consideration while evaluating your credit score.

Is it Possible to Terminate after the Agreement has reached its end?

You can end the agreement only while it is in effect, that too only after you have completed at least half of it. So, if you’re going to change your mind about it, it would better be before the end of the agreement. 

Otherwise, the law doesn’t give you the right to terminate it after it has ended. Also, if you won’t be able to afford your debt, you must end it before your creditor does. Furthermore, you might end up having to pay the full amount, which would bring stress into your life.

How do you start the process of the Termination?

As useful a Voluntary Termination is, it’s also easy to apply for. Though you must make sure first that it applies in any case. For any of the reasons mentioned, you can send a Voluntary Termination letter to your financier and let them know of your decision. After making sure that you fulfil the conditions, they’ll have no choice but to proceed with it. 

Furthermore, it doesn’t come into effect immediately but goes through a procedure. During this time, you might have to keep paying the instalments. Some creditors often try to get as much money from you as they can by increasing the time taken by this procedure.

After informing them of the termination, you’ll either be required to drop off the car at a location, they will tell you, or they’ll pick it up from your location. If they find any damage that they don’t count as reasonable, they’ll charge extra cost for that. Otherwise, you aren’t supposed to pay anything more than 50% of the payable amount to end the agreement.

What are the problems you can face with the Termination?

The very first thing you must know is that you almost surely won’t be getting much help from your creditors, for obvious reasons. Just because you’re legally empowered to put an end to the agreement, they’ll have to follow through with terminating it. So, you must prepare yourself accordingly before you send them a Voluntary Termination letter. 

They might not even have explained to you properly the options you have if you want to end the contract, which happens quite commonly. Another issue you might face is that there is no definition of reasonable damage to be found. They differ from one company to another, which sometimes might pose a disadvantage to you. 

So, you must take the necessary steps such as keeping a record of the conditions of the car, from the beginning. Otherwise, they might get a chance to charge an unreasonable cost and you’d have to put up with that.