How many people can’t afford loan repayments?
According to a National Audit Office report, around 8.3 million people in the UK struggle to pay back debts such as personal loans. Furthermore, approximately 22% of adults in the UK have less than £100 available in savings.
As the population of the UK is estimated at around 67 million, this means more than ten per cent of people could struggle to pay loans.
What happens if you don’t pay a personal loan?
When you miss a loan payment, initially you’ll typically be charged a penalty fee – often around £25. As well as this, additional charges may be included to cover the interest on the missed payment.
However, if you continue to miss payments, this record will have a determinantal effect on your credit score – making it harder to obtain certain financial products in the future. Eventually, continually failing to pay the loan could even result in a default notice, County Court Judgement, bankruptcy, or the lender might take steps to reclaim assets.
What is a default notice?
If you’ve missed around three loan payments, the lender will usually issue a default notice. A formal declaration, this indicates your loan, the payments you’ve missed, and what you should do to rectify the matter.
Once you’ve been issued with this notice, it will get added to your credit report. This indicates to other lenders that you’ve failed to keep up with loan repayments before.
What is a County Court Judgement?
A County Court Judgement (abbreviated to CCJ) is more serious than a default notice. A court order, this indicates the amount you need to pay back within 30 days. If you’re unable to do so, then a CCJ stays on your credit report for six years.
Similar to the default notice, a CCJ will make it much harder for you to obtain loans in the future.
What is bankruptcy?
If you cannot possibly afford to pay back your loans, you may be declared bankrupt. In this situation, you could lose your assets and the bankruptcy notice will get added onto your credit report. Even if you get your finances back on track, lenders will be very unlikely to provide you with credit in the future.
How to reduce loan repayments
If you’re unable to repay your loan, then you should initially speak with the lender. In some situations, they’ll be able to work out a more favourable repayment plan or give you extra time to get your finances back on track.
If your lender refuses to alter the terms of your loan, then you should consider debt consolidation.
I can’t repay my loan, what do I do?
When personal loans get on top of people, many won’t admit they need to do something about it. However, just by viewing this web page, you’ve made the first and hardest step to regaining control over your finances.
Our advisors have heard just about every situation and assisted thousands of people in resolving their personal loans. Get in touch today and we can talk to you about debt consolidation.
Pros and Cons of a personal loan
The pros:
- You might be able to borrow more than with a credit card;
- Typically, you will have a lower rate of interest when compared to a credit card on larger balances;
- Repayments are usually a fixed amount each month, making it easier to budget your outgoings.
The cons:
- Personal loans can sometimes have higher rates of interest than some other forms of borrowing, particularly if you only borrow a smaller amount;
- Because the interest rate might reduce the more you borrow, you might be tempted to take out a bigger loan than you need;
- Usually personal loans start from £1,000 repaying at a minimum of 12 months. So you could end up borrowing more than you need, putting you further in debt.
