What Happens If I Can’t Repay My Loan?

If you miss a loan payment, you will likely be charged a late payment fee along with interest payments. First and foremost, if you borrow money and subsequently find yourself unable to repay any loan, be it a short-term loan or even a mortgage repayment, you should always get in touch with the lender straight away as they may be able to help you.

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Continually missing loan payments may result in a County Court Judgement (CCJ) or even bankruptcy. Missing loan repayments and defaulting on your financial obligations can lead to you ending up with bad credit.

It is never a good idea to miss your loan repayments, and you should always try your utmost to budget properly and in advance so that you don’t miss your scheduled repayments.

What Are the Consequences If I Can’t Repay My Loan?


Before taking out a loan, you should always make sure that you are able to meet the repayment plan. However, circumstances change, and you may find yourself unable to meet your repayments . You should, in the first instance, see what money you are currently spending that can be reduced, with the money saved going towards clearing your debt.

In some cases, there may be a simple solution to paying back your loan. For example, you may be able to sell something of value like a car. However, it is not always this simple, and everyone will need to make a fair and sensible judgement based on their circumstances and financial needs.

If you are unable to repay your loan in accordance with the agreed terms, you could face:

  • Damage to your credit record

  • Fees for missed payments (plus interest)

  • Bankruptcy

  • Repossession of your collateral (if the loan is a secured loan)

  • Being issued with a county court judgement (CCJ). If you fail to make a payment, the lender may take legal action against you. As a result, you may receive a CCJ requiring you to pay back the loan. Additionally, a CCJ will negatively affect your credit score.

What Happens If You Miss a Loan Repayment?

If you miss a loan payment, you will usually incur a penalty or late payment fee. The exact amount will depend on the lender, the terms and conditions of your loan agreement, the loan type, and how much you have borrowed.

As soon as you are aware that you will miss a repayment, it is important you contact your lender, who may be able to assist you.

Every time you miss a scheduled payment, you miss your monthly opportunity to reduce the capital. As a result, not only will it take you longer to pay off your loan, but you will have to pay more interest overall .

If missing a payment is just a one-off, you are unlikely to face further action beyond additional fees, but this will depend on the lender. If it transpires that you cannot repay your loan, it is always worthwhile contacting your lender to explain the situation and see if you can get placed on a more manageable repayment plan.

In more extreme cases of missed payments and when you have other debts, you may have to file for bankruptcy or look towards an individual voluntary arrangement (IVA). An IVA is an agreement between a borrower and lender outlining terms for repayment.

What Happens If I Can’t Repay a Secured Loan?

If you have a secured loan, it means that you have borrowed money against a valuable item, such as property or a vehicle. For example, when you take out a mortgage, you borrow money against the property you are purchasing. This means that the house is the collateral for the loan in question, meaning you stand to lose it if you default.

With secured loans, the lender has the right to repossess and sell your collateral. The lender may decide to repossess your collateral to reclaim their money should you miss your repayments and fail to repay your debt. Depending on what you have put up as collateral, this could land you in a lot of trouble.

If you have an unsecured loan, it is more difficult for a lender to force you to sell your possessions in order to repay the loan. Nevertheless, not repaying any loan will lead to bad credit, which will make it harder in the future to access credit and borrow money in any form.

In extreme cases, a lender can apply for a charging order and get the loan added to your property via court action.

Will Missing a Loan Repayment Affect My Credit Score?

Missing a loan payment will negatively impact your credit score. If you miss a payment or pay it after the due date, lenders have the right to report this to credit reference agencies, such as Equifax and Experian.

This means that it will appear on your credit report and will impact your future borrowing power and creditworthiness. Lenders will be less likely to want to lend you money in the future if your credit report shows that you have missed payments in the past.

Your credit record shows all of your repayment histories, including positive and negative marks. If you have multiple unpaid or late debts, they will be negatively reported on your credit history.

Your credit file will show any cases of CCJs, default notices, bankruptcy, and individual voluntary arrangements (IVAs).

What Are My Options If I Can’t Repay My Loan?

While there are consequences for not repaying a loan, there are some simple actions you can take if you are unable to repay the money. You should never ignore debts in any form and should always look towards clearing your debts and repaying the money you owe as soon as possible.

Some lenders will even allow you to overpay or make your loan repayments early with no penalties. If you can pay a loan early, this is always a responsible financial practice to consider.

Speak to Your Lender

You should always try to speak to your lender as the first port of call to see if you can explain your current financial circumstances and renegotiate your repayment plan. You may be able to work together to come to a new arrangement that can prevent you from paying late fees or negatively affecting your credit score in the future.

Prioritise Your Debts

If you are faced with a lot of debts, first consider what you owe and to who. This will help you prioritise debt and decide which is the most urgent. For example, rent and utility bills should take precedence, but you can also look at which debts incur the highest interest rates and penalty fees as it may be worth setting those as high-priority debts. One method is to pay the minimum payment on all of your debts and then use the rest of your money to pay off your highest debt.

Consolidate Your Debts

If you have a lot of different debt types, you could move all of your debt to one place by taking out a debt consolidation loan or getting a 0% balance transfer credit card. Moving all of your debt to one place makes it easier to manage and may mean you will be less likely to miss a payment. This can make it quicker and easier to tackle your debt.

Ask for Help From Friends or Family

If you are struggling to repay your loan, you could look to friends and family and call in a favour. They could help you cover your loan in the short term so that you are saved from accumulating interest and late repayment fees.

You may only need to borrow £300 or even less from a family member or friend to pay off what is due, making a big difference. If you choose this option, always make sure that all parties are clear about when the money will be repaid, as you risk losing an important relationship.

Author Maggie Clarke
Maggie Clarke Content Ops Lead
Maggie leads the content operations team at Doddler.co.uk. She is an expert on personal finance, by way of a lifetime of gathering practical knowledge on what to not do with your pocketbook. When not blogging about money, Maggie can be found rambling through the roughest terrains. She considers herself charming yet troublesome and would love to meet you someday, just not today.
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