You know that new car smell? It’s great. But it doesn’t last long, especially if you’re a new driver in Texas. It can be scary to get behind the wheel for the first time, but with practice and experience, you’ll learn how to handle your car responsibly so that accidents are rare. That same logic applies with buying a car as well – because you need to make sure that you have the means to pay for it before making the purchase. However, there are many people who end up financing their cars or leasing them instead of paying cash up front. If you lease or finance your car, there are likely additional payments involved at the end of the term. You might want to sell or trade in your car before then; however, if you default on your loan or lease terms, you may not be able use it as collateral again. To help prevent this from happening so that you can continue using your car even after leasing or financing it, we’ve compiled these helpful tips about Texas debt collection laws and what they mean for you moving forward:
What Does Texas Debt Collection Law Mean?
Debt collectors are individuals or companies who attempt to collect on a debt that you owe. These debts may be from credit cards, medical bills, car financing, and more. In Texas, these collection agencies are governed by the Consumer Credit and Debt Collection Act (CCDCA) – which is an act that was enacted to protect debtors from unfair or abusive practices. This act also details the rights of debtors, including how long a collector is allowed to attempt to collect a debt before a lawsuit can be filed, what methods of communication can be used, and more.
Can a Car Dealer Maintain a Security Interest in Your Car After You Finance It?
As we mentioned above, if you finance a car instead of paying cash up front you may be required to sign a promissory note. This means that the car dealer has the right to collect on the debt if, for example, you miss payments and end up defaulting on the loan. The dealer or lender will often be able to take any assets that you put up for collateral at signing. However, if you sign a contract that includes a security interest in your car, the dealer can repossess and sell your car if you miss payments on your loan. The dealer will be able to collect on your debt by repaying your loan with the proceeds from the car sale.
Can a Car Dealer Maintain a Security Interest in Your Car After You Lease It?
If you lease a car instead of financing it, the dealership will most likely require you to sign a lease agreement. In this document, you’ll be leasing the car for a set period of time – and the dealership will typically have the right to repossess and resell the car if you miss payments. There are a few important details you should be aware of when leasing a car:
Who Can Collect on the Outstanding Balance After You Finance or Lease a Car?
Generally speaking, the original creditor – such as a bank that issued you a loan or a leasing company that you signed an agreement with – has the right to collect on the outstanding balance after you default on your loan or lease. Additionally, the debt collector may also have the right to collect on the outstanding balance after you default on your loan or lease. However, you do have certain rights when it comes to dealing with debt collection in Texas. For example, you have the right to know who the debt collector is, why they’re trying to collect debt, and what types of communication they’re permitted to use. You also have the right to dispute the debt in writing and request verification of the debt, as well as request written instructions on how to proceed with a payment plan.
Confirming Which Party Has the Right to Collect Debt After Financing or Leasing a Car
If you’re having trouble making payments on your car, you may be worried about getting into trouble with the original creditor. However, there are ways that you can avoid defaulting on your loan or lease obligations. In many cases, you can make one payment to the original creditor that covers your lease payment, your car payment, and any other applicable fees like insurance. This way, you can ensure that you stay in good standing with all parties. However, before you make one payment to the lender, it’s important to confirm that the creditor has the right to collect debt on your lease or loan. You should ask the lender to send you a written notice that includes the following information:
How to Protect Yourself From Potential Issues With Debt Collection and Selling/Trading-In Your Vehicle
As we mentioned above, if you default on your loan or lease, the original creditor has the right to collect on the outstanding balance. However, if you sell or trade in your vehicle before the loan is paid off, you may be in violation of the Texas debt collection laws. If you default on the loan, the original creditor will have the right to collect on the debt and repossess your car. However, if you sell or trade your car before the loan is paid off, the new owner will be responsible for the remaining balance on your loan.
Final Words: Takeaway
If you’re considering financing a car or leasing one, it’s important to understand the implications of doing so. Once you sign the contract, you’re responsible for making payments – even if you end up selling the car or trading it in for a new one. In some cases, you may want to consider financing the car for a longer term in order to keep your monthly payments lower. It’s also a good idea to keep track of your payments in a calendar or software program so that you can plan for future payments each month.