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Can’t afford my loan payments – What Can You Do

Can't Afford Loan Repayment

For free and impartial money advice and guidance, visit MoneyHelper, to help you make the most of your money.

If you have found yourself muttering this phrase to yourself recently, you are not alone. Lots of people every year take out a loan from a responsible lender that they can afford, but then the situation changes.

You might have lost your job unexpectedly or have an unforeseen bill to pay, such as a car repair so you can still get to work. Whatever the reason you can’t afford to make your loan payments, we have top tips in our simple guide.

What Happens If I Don’t Pay?

Before we dive into what you should do if you can’t afford your upcoming loan payment, you should probably know what can happen if you chose not to pay.

Defaulting on a loan payment can lead to serious consequences. At first, you should expect a request for payment from your loan provider. If you do not communicate with them, they may even send a Letter Before Action (LBA) which is a letter asking you to pay (and maybe pay late fees!) or risk being taken to court and made to pay or eventually face bailiffs.

There are ways to avoid being taken to court and we will touch on those later. You should also know that missing loan repayments can also leave a bad mark on your credit file and reduce your chances of getting credit again.

What Should I Do If I Can’t Pay My Loan?

If you know that you will not be able to make your next loan repayment, the best thing you can do is get in contact with your loan provider in advance. You might be a little nervous about calling them and telling them you can’t pay, but it can work in your favour for lots of reasons.

Many loan providers want their customers to give them notice when they won’t be able to pay and often want to help find a resolution.

For example, if you call your loan provider and tell them you can’t pay because you have lost your job, they may reduce your repayments for x number of months while you search for a new job.

If you cannot pay for one month only because of an unexpected expense – such as the aforementioned d car repair – the loan provider may reduce your repayment to make it affordable or some may even give you a one-month repayment holiday.

At the time of writing, these repayment holidays are at an all-time high because of COVID-19.

Overall, opening a dialogue with your loan company before you miss a payment is a good way of dealing with the situation. They are likely to help, especially if this is the first time you have been unable to pay.

What If I Am Already Being Chased for Payments?

If you already missed the opportunity to get in touch before you missed the repayment, then try not to panic.

The obvious step to take is to open a discussion with the loan provider today and ask if a new repayment agreement can be arranged based on your new circumstances.

If you are not able to reach an agreement with a new repayment schedule, it is likely that you will fall into debt.

Although this is a serious situation, there are reasons to remain calm.

Debt Solutions for Personal Loan Debt

There are a number of debt solutions for people with unsecured personal loan debt. One is a Debt Management Plan that is essentially a new monthly repayment schedule to pay it back. If you have already tried to renegotiate a repayment plan yourself and failed to meet eye to eye with your creditor, you might not be too hopeful.

However, some debt management companies offer to help get you an affordable IVA and will speak to your creditors themselves, putting forward a compelling case why this is best for everyone. You might have to pay for this service but it can get you back on track and reduce debt stress.

This might not be necessarily the only or the best debt solution to use. If you have no disposable income to make repayments and do not own a home, then a Debt Relief Order may be more suitable. Or if you have multiple sizeable debts, you might benefit from an Individual Voluntary Arrangement, also provided by a debt management company or charity. 

But the first step to take is to get free help and advice from a UK debt charity!

Can I Wipe My Unpaid Loan Debt?

Unpaid loan debts can only be wiped if they meet certain criteria. The debt must be at least six years old and you must not have made a repayment in the last six years (or the clock resets itself for another six years). Lastly, no debt which has already been ordered to be paid by the courts can be written off.

To learn more about the loophole to wipe unpaid loan debts, search for information on Statute Barred debt.

Can I Lose My Possessions for Not Paying?

If you ignore the letters asking you to pay your loan or don’t take any action to get out of debt, there is a chance that your creditor will take you to court and ask for a CCJ on the debt asking you to pay. This will mean the law has said you must pay. 

If you continue not to pay then the loan provider could employ bailiffs to come to your home and take payment. If you cannot pay at this point, the bailiff is allowed to remove goods to be sold to pay off your debt.

But by speaking with your loan provider early or using debt charities and debt management companies, this is unlikely to happen. Even your loan provider won’t want to take it this far.

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