Five things you can do if you can’t make your loan payments
Sometimes, paying back a loan is easy, like when you can sell something you already own. For example, if you can’t repay your car loan, selling the car is a good idea. Then, you could switch to a cheaper model or take the bus for a while.
But this isn’t always the case. You could get in trouble with your loan provider. If you don’t pay back your bank loan according to the terms you agreed to, you could:
- Lenders will tell credit reference agencies (CRAs) about your missed payments, which can hurt your credit record.
- Be given a county court judgment (CCJ) by the lender, have to declare bankruptcy
- Lose the things you put up as collateral for a secured loan, like your home.
In this article, we’ll discuss what you can do if you can’t repay your loan.
What Can You Do If You Can’t Repay The Loan?
1. Contact Your Lender
The simplest step you can take when you can’t pay back your loan is to contact your lender. Even though it might seem intimidating, lenders are more willing to help you than you think.
Tell them everything honestly. Tell them you’re in a situation where you cannot repay the loan. Ask them if they can change the terms of the loans so that your repayment is lowered. We often think lenders are cruel and won’t help you, but this is not the case. If you’re honest about your problems, they’re more than willing to help you.
2. Consider Refinancing
If you are having problems paying your debt, then there is one option that is the easiest way to get rid of your debt – Refinancing. When you refinance, you take a lower-interest loan to pay off a higher-interest loan.
This way, the gap between the interest rates helps you save on your debt retirement. You can potentially lower your debt and help you in making the repayments.
Before you think about refinancing, research different lenders and their rates. Be careful because refinancing may make your loan last longer. This happens because you would have to pay off your loan and lower interest for longer.
If done right, refinancing can be a good way to handle your loan payments. You need to learn about Refinancing, and such vendors are willing to offer you rates that are affordable and within your budget.
3. Prioritise Your Spending
One of the best ways to save money for loan repayments is to cut back on your spending. You must look at your spending and see where you are making unnecessary expenses.
You can check it on your monthly expenses and bills such as rent, mortgage utilities, the money spent on food and transportation, etc. Ask yourself where you can cut back and save some money.
When you sit down with a pen and paper and review all your spending this way, you can find reports where you can save money. This money that you save would be a lifesaver when it comes to your loan payments.
Here are some questions that will help you decide where you can cut back on your spending:
- Can you reduce the number of times you eat out?
- Can you take the bus instead of getting a cab?
- Are there any unnecessary output subscriptions that you’re paying for?
- Can you make an extra side income by freelancing?
4. Use IVAs
IVA stands for Individual Voluntary Arrangement. You could use an IVA or file for bankruptcy if you didn’t pay back your debts. Both work in different ways, so it’s important to know how each works and how much it will cost before making a choice.
An IVA is a formal agreement between you and your loan provider(s) to stop paying interest and reduce the amount you owe. It can help you make your monthly payments easier to handle. Setting one up usually costs around £400, but prices can vary.
It will hurt your credit score, but not as much or as publicly as declaring bankruptcy. But if you don’t pay your IVA, you’ll probably go bankrupt.
You would be free of all your debts if you went bankrupt. This might sound too good to be true, but it will greatly damage your credit report.
If you file for bankruptcy, getting credit will be hard for you in the future. Your credit report was made six years ago. So even if you fix your money problems, your past will still hurt you. Also, filing for bankruptcy costs £680.
You can pay in instalments, but you have to pay the full amount before sending your application. Since it’s also out in the open, it may have a bad name.
Loans from direct lenders
People often don’t know the best loans for them, which is a big hurdle for them. Benefit money loans from a direct lender are one of the best low-interest loans someone struggling to pay off a loan can get.
The terms of this loan are very flexible, and it is readily available with direct lenders. There are no strict eligibility requirements to qualify for this loan.
Thus known can be used for both short-term and long-term expenses. It can be used for anything from minor home repairs to major expense financing.
These direct lenders don’t charge hidden fees or late payment fees, which is a big advantage for those needing extra breathing space while repaying their loans.
If you ever need money for a big expense, you can easily get a money loan for 1000 pounds from a direct lender using this type of funding. In the end, if you want to pay your bills, you’ll need a long-term plan. When you don’t have to put out fires all the time, life is less stressful, and you should be able to move on to fund future goals.
You will repay a personal loan throughout the specified period. Nonetheless, you might decide to pay off the loan early if you have some money saved up or have additional money. In the long run, paying off a loan early may save you money since it lowers the total amount you have to return. Remember to factor in any early repayment fees when determining whether this is your best option.
Ailsa Adam is the Editor-in-Chief and former content head at Hugeloanlender. She has been a valuable member of the content strategy team since 2017 due to her abundant experience in the finance sector. Passionate about helping individuals navigate the world of loans and personal finance, she has dedicated herself to acquiring extensive knowledge on various financial products. Before her role at Hugeloanlender,
Ailsa worked as a seasoned journalist and writer, specialising in creating informative blogs and articles on diverse loan types. She is known for her meticulous research and commitment to delivering accurate and engaging content. She holds a degree in MBA Finance and has a keen interest in creative writing and art.