Car Loan (Secured Loans)
and Leases

Cars and assets other than real estate (ATV, RV, boat) can be either financed by a hypothec, a conditional sales contract or a lease agreement.

How it works

In what is commonly known as a ‘secured loan’, a financial institution uses the purchased asset to secure the loan and it can take possession of the asset if you stop making payments. A conditional sales contract is also considered to be a secured creditor (as is a lease agreement) and in both cases, the creditor can take the asset back if you fail to make your payments.

Whenever you do business with a merchant, your rights are protected under the Consumer Protection Act. If you fail to make one or several of your loan payments, the merchant must wait 30 days before taking possession of the asset or starting legal proceedings against you. Moreover, if you have paid more than 50% of the debt by the time that you miss your payment, they must get authorization from the court before taking possession of the asset.

If they decide to take back the asset, your debt will be eliminated by returning it.

Possible solutions

If you’re having financial problems, you may want to: 1) keep your car, motorcycle, VTT or RV; 2) return the asset, either because you don’t want it anymore or you can’t afford it.

When you’re going through a debt consolidation, consumer proposal and even bankruptcy, you can decide to keep the asset in question as long as payments are up-to-date and the asset is insured.

You can also return the asset, in which case the creditor’s debt will be included in a consumer proposal or bankruptcy. You will therefore not have to pay it. But, if you’re consolidating your debts, you will be responsible for any losses that the creditor may suffer when they take possession of the asset.


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