Why it’s important to repay your loan on time
When a lender approves your application for a loan, you enter into a credit agreement. By signing this agreement, you pledge to pay back the money you’ve borrowed, plus interest, over a set term. For a short-term personal loan, your repayments will typically be made in monthly instalments.
Your payments need to be made in full and on time each month. If you default on your repayments, your lender could charge you a fee. In addition to this, a late or missed repayment could cause your credit score to decline.
Help, I can’t repay my loan! What to do if you can’t afford to repay your loan
If you’re worried that you could struggle to make an upcoming repayment on your loan, you should contact your lender as soon as you can.
Money worries can feel daunting and uncomfortable to talk about, but it’s important not to ignore the situation in the hope that it will go away. Act now to avoid a spiral of money problems. The sooner you share your concerns with your lender, the sooner they can help you work through them and take back control of your finances.
This applies to all types of loans. If you’ve taken out a secured loan, please be aware that if you default on a repayment, your lender is within their right to seize the asset that you used to secure your loan, such as your car or house. If you can’t pay your secured loan, please get in touch with your lender without delay.
What happens if you can’t pay back a personal loan?
Once you’ve contacted your lender to let them know about your situation, they will be able to talk you through any options that could help reduce some of the financial pressure you’re facing.
The support you could be offered will depend on your lender.
Some options that could be available include:
- A repayment holiday;
- Temporarily reduced repayments; or
- An extension of your loan term.
It’s very important to explore these options fully before you decide. While some of these solutions could provide short-term relief, they could also affect your financial situation further down the line. For example, extending your loan term could reduce your monthly repayments but increase the overall cost of borrowing. This is because the longer your loan term, the more you’ll pay in interest.
I can’t repay my loan and I’m worried that my lender will judge me; what can I do?
Whether it’s an emergency dental bill eating into your monthly budget or a sudden job loss, your lender will understand that there are some things we can’t control.
Your lender will not judge you or your situation; that’s not what they’re there to do. The advisor you speak with will be trained to help with sensitive customer queries and will have helped with many situations similar to yours.
What are the potential consequences of not paying your loan?
If you can’t afford to make your repayments and you don’t let your lender know in advance, you could be charged a late fee. If you default on your repayment, you will also harm your credit score.
A low credit score could make it more difficult to be approved for credit if you need to apply again in the future.
I was approved for a loan after a search with CashLady; could you help me?
CashLady is a credit broker, not a lender. Unfortunately, we’re unable to answer any questions about the loan you have taken out. If you can’t pay your loan, you should contact your lender directly.
In the section below, we’ve included a list of resources that you might find useful if you’re struggling with your finances.
You’re not alone
Money worries are extremely common – and they’re nothing to feel embarrassed about.
There are many reasons why people find themselves struggling with their finances, and it doesn’t mean that you’re bad with money or irresponsible with your spending.
Whatever your situation, you deserve support. Charities and organisations such as StepChange, MoneyHelper, Citizens Advice, and National Debtline are on hand to offer free, impartial guidance to anyone concerned about money and debt.
How to keep up with your loan repayments
- Set up a Direct Debit. This way, your payment will automatically leave your account on or around your scheduled repayment date.
- Create a budget – and stick to it. Calculate how much money you’re guaranteed to bring home in a month, after tax, and deduct your necessary costs, such as housing, bills, and food. Remember to include your loan repayment as an essential cost. The money you’re left with after making your necessary deductions is disposable income, and this can be saved or spent on whatever you choose. Having access to a savings pot could be useful in case of a financial emergency and could mean you won’t need to apply for credit again in the future.
- Assess your budget. If a one-off, unplanned cost has affected your ability to repay your loan this month, take another look at your budget. Are there any expenses that you could temporarily cut back on, such as streaming services? Making small switches could mean that you’re able to prioritise your loan repayments and get back on track.
Of course, sometimes life happens, and unexpected expenses get in the way of our carefully constructed budget. If this is the case and you find yourself faced with an impossible financial situation and a looming repayment date, please speak to your lender as soon as possible.