Category Archives: Payments

Don’t default heavy equipment payments

Loans are always an additional burden that one has to deal with. Loan should be taken only when you are sure that you will be able to pay it off in time. However, the future is unknown to all of us and when things change it either change for good or for bad. We borrow money with the hope to pay it off and also make enough effort towards that direction. Business loans are riskier for banks and hence they grant loans after doing a lot scrutiny. They verify the nature of business, the reason why loan is required and many other relevant factors that play a crucial role to determine if the borrower can pay the loan in a timely manner. Only after the lender is absolutely sure the loan gets sanctioned. There are instances when even after meticulous scrutiny some of the borrower defaults the payment. This certainly hurts the bank but at the same time it also hurts the defaulter in a much grave way.

In the construction sector, you just can’t get away without paying the lender especially when you have borrowed the money to buy heavy equipment. You may be doing well in your business and have lot of projects under your belt. Being so busy you might forget to pay the lender for the heavy equipment. If you forget that, it is still fine but you can’t miss the non-payment letters that you get from the bank. If you fail to pay them even after receiving letters from them, the lender will repossess the heavy equipment and they have every legal right to do so. They will try to reach you before taking this action but if you are on a business visit or are so entangled with your work that you do not pay any heed to them then it will be a cause of worry for you. The lender will get in touch with a repo company who will without letting you know about anything will drop in to your construction site and will tow the machine.

It will be very difficult to get it back from them. Nevertheless you have to pay the dues in full along with the penalty you may still have to go through a lot of hassle before you finally get it back. However if you still fail to pay them then the heavy equipment will be auctioned and it will have a new owner. This is definitely what you will not want to go through as it paints you in a negative light. Moreover your credit rating will go for a toss and you have to probably wait for years to get a loan to buy heavy equipment.

Getting a loan at a lower interest rate becomes extremely difficult for people who have earlier defaulted on loans. So if at all you come across a situation where you have defaulted and have now learnt a lesson from your mistake, the hard time will not pass so easily. No major lenders will be willing to fund you and if at all they do they will at a higher interest rate. This in no way sounds to be beneficial. Therefore keep a track of your loan payment schedules and do not miss a single payment.


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What happens to heavy equipment whose payments are defaulted

Not every person who has borrowed money from a financial institution pays it off on time. There are few borrowers who for some reason or the other turn defaulters. It is not that they do not want to pay their debts off but the circumstances somehow do not allow them to pay the debts. Many people who take up their career in the construction industry take incorrect decisions that have a hard hitting impact on their finances and eventually it leads to non-payment of monthly dues. There are handful of borrowers who simply lack the intention to pay-off the debts but these kinds of people are quite rare as people are aware that any default in payment can have a strong impact on their credit rating which they do not want to see tainted. Now the heavy equipment whose payments are defaulted are usually repossessed by the banks.

Banks do not want to incur losses when they realize that the borrower is unable to make any further monthly payments and therefore they give the work to repossess the heavy equipment to a third party who specializes in towing the heavy equipment from the borrower’s place to the bank’s garage. Now the work of the repo guys is tougher as it is not easy to tow the machine without the approval of the borrower. It is quite likely that the borrower will not approve the repo guys to just take away the heavy equipment. They may cause problems for them and the job of the repo guys is to tow the machine without creating a furor on the spot.

The financial institution has to pay decent amount to these repo guys for their hard work. Other than that, every other repo agent has different charges based upon their experience and their ability to repossess heavy equipment. So once the machines are handed over to the bank, the bank has to arrange to auction the heavy equipment and sell it at a price so that it can cover up the principal amount. Now the question that comes up is does the bank get any buyers for these used heavy equipment. Well, as a matter of fact, the banks get lot of buyers because the deal they will get during the auction, they can’t expect it anywhere else. Such auctions are just the thing any buyer would want to have.

However, the irony is they have to take what they get in the auction. They may not find the equipment they wanted for their business. For instance, if the bank decides to auction few equipment which are basically dozers and graders and people who are in need of an excavator may find the auction worthless. So it does not serve the purpose of everybody who is present in the auction. But for people who want to buy heavy equipment at lower price so that they can then rent it out, for them it is a fair deal. They have to pay the amount in cash and take away the heavy equipment.