Sitting with a poor credit score and piles of debt is no way to live. And having an accident-damaged or non-running vehicle that’s financed on your hands can place an extra unnecessary burden on your back. One of your options moving forward may be selling your damaged car, opening up more opportunities to crunch down on the debt and relieve the worries of financial pressure. But how can selling a damaged car improve your creditworthiness?
Increased electricity prices, compounding debt and insecurity have placed many South Africans between a rock and a hard place. How can you get out of the place of financial burden and see a more positive future for yourself?
Let’s explore how selling a damaged car (particularly one that’s financed) can alleviate your stress levels and bring you a brighter financial future:
How does debt affect your credit score?
A credit score is a numerical representation of a person’s creditworthiness based on their credit history and financial behaviour.
Lenders use a credit score to assess how likely someone is to repay borrowed money.
Debt affects a credit score positively and negatively through payment history and credit utilisation. If debt is managed responsibly with on-time payments, it can positively impact the score. However, high levels of unpaid debt or missed payments can lower the score, signalling a higher risk to lenders.
If you’re struggling to make your monthly payments, selling a damaged car (especially one that is still under finance) could free up some extra cash to repay debt and meet regular monthly instalments on other purchases.
Freeing up cash flow
One of the main benefits of selling a damaged car is bringing in a cash lump sum to knuckle down on other debts.
Uninsured drivers are often burdened by unexpected and costly expenses related to their vehicles. These include repairs to mechanical or electrical components or dent repair after an accident.
Even if it’s not in perfect condition, selling that car can provide immediate funds to pay off debts or manage other pressing financial obligations.
Using the cash lump sum from the sale of the damaged vehicle can whittle down outstanding loans and credit card debt in a hefty slap, improving your credit rating.
Lowering your debt-to-income ratio (the percentage of your monthly income that goes toward paying off debt) is crucial to improving your credit score over time, particularly if you are in an unfavourable financial scenario.
Can you sell a financed car?
Selling a car under finance can be nerve-wracking, especially if the said vehicle has been involved in an accident or is no longer running. These situations mean you are likely to receive a lower selling price for your car, which may fail to pay off the remaining debt owed to the lender.
So when you ask: ‘Can you sell a financed car?’ The answer is YES! However, there are a couple of essential considerations to bear in mind.
Firstly, you’ll need to settle the remaining balance of your loan with your lender before officially selling the car. Secondly, be sure to sell your damaged car to an auto salvage provider that deals directly with financial houses, eliminating the stress of added admin from your side.
How to sell my financed vehicle
The process of selling your financed car is simpler than you may have imagined. Your best bet is to find a trustworthy auto salvage buyer who specialises in purchasing financed accident-damaged vehicles.
The company will then use the proceeds from the sale to pay off the balance on the loan, and the remaining cash (if there is any) can be given to you to manage any other debts, such as home loans or credit card debts.
Reduce financial uncertainty
Owning a financed, accident-damaged or non-running vehicle can be an unnecessary expense. Forking out cash to carry out repairs on the vehicle that outweighs its likely selling cost can be cumbersome.
By selling a damaged car, you can work to reduce your debt and improve your credit rating. This can bring a boost to your mental health and open you up to a more positive outlook on life.
Avoid missed payments
Missed payments are one of the main contributors to poor credit scores.
If you’re struggling to keep up with your financial obligations, selling a damaged car could provide the money you need to stay current on your bills.
Find a trusted buyer for selling your damaged car
Need to pay off debt faster and rapidly improve your credit score? If you carry an outstanding balance and poor credit score due to your damaged car, there’s no use letting it drain your financial resources.
Opt to sell your accident-damaged car to a reputable auto-salvage dealer by making sure it ticks the following boxes:
- Quick, easy upload of your vehicle details on a safe online platform
- Obligation-free offer within 24 hours
- Free towing of your damaged vehicle
- Hassle-free deregistration of the car from your name
- Over 200 positive reviews on independent ratings platform Hellopeter.