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Traditionally, a bank loan – or personal loan – is an agreement with a lender which is repaid over a specific period. You will know exactly how much is owed and how long you need to keep up repayments.
Bank loans, therefore, don’t usually come up with many hidden surprises. Still, a change in circumstances – such as a period of illness or unemployment – can make a personal loan unmanageable.
If your bank loan debt is increasing, and you don’t see a way to repay what’s owed, many organisations will recommend speaking with the provider and trying to rectify the situation directly. However, in this case, it depends on the bank’s discretion.
Although you might be able to negotiate a solution, such as a payment break or freeze interest, your provider might also choose to use legal action to reclaim the debt.
If you can’t pay a personal loan, the consequences are not as severe as some other forms of debt because these are typically unsecured. This means your assets are not in immediate danger of being repossessed.
This doesn’t mean there aren’t consequences though. Initially, you’ll be served a default notice, which details where the breach occurred, and usually given a few days to rectify the situation.
As well as this, you can expect phonecalls and reminder letters from the bank requesting swift payment.
If you can’t pay back your bank loan, and continue missing payments, you could:
The problems only multiply with the number of missed payments. It’s important to deal with unmanageable debt as soon as possible to prevent the situation from getting worse. Fortunately, we’re here to help discuss what options could be available to you:
Although it almost goes without saying, perhaps the best way to get out of a personal loan is to repay it. If this isn’t possible, then your options are limited.
One exception is if you repay the personal loan within the cooling off period – this is usually within 14 days of making the agreement. In this situation, you would then have 30 days to repay the money.
If outside the ‘return period’, then the only other way to get out of a personal loan is to consider a debt solution or something which writes off what you owe – this could include an IVA.
Getting another loan to repay what you owe isn’t usually a good idea. After all, if you’re already struggling to repay your creditors, lenders are unlikely to give you reasonable interest rates. Instead, consider obtaining debt advice to get on top of your financial situation as soon as possible.
We’ve mentioned an IVA as a possible solution to your bank loan debt. This option is a legally binding agreement between you and your creditors (in this case, the banks who provided the loans) designed to help you regain control of your finances.
Set up by a qualified insolvency practitioner, the aim of an IVA is to help pay off your debts at a rate you can afford.
If there are still outstanding funds remaining by the time the IVA ends (usually about five or six years), these are typically written off.
While an IVA is not the ideal solution for everyone – and there are others available – it can be an effective way to deal with unmanageable bank loans.
As a bonus, as this option is legally binding, your bank must agree to the terms of the IVA once it’s been approved.
After the IVA ends, and your debts have been resolved, you might consider taking out another bank loan. Although there is nothing stopping you from applying for a loan straight after an IVA, the details of the agreement stay on your credit file for six years after the start date.
As this will have a detrimental effect on your credit rating, banks are unlikely to approve the loan until your score improves.
Fortunately, this should happen in time and you’ll be able to apply for a new bank loan eventually.
The longer you leave bank loans unpaid, the worse your debt may become. It’s best not to suffer in silence and act as soon as possible.
Get in touch today and we’ll do our best to assist you. As more than 400 people contact us daily we promise you won’t be the first person today struggling with bank loan debt.
Just click the button below and we’ll be happy to have a no-obligation chat about your circumstances.
Debt write off applies to unsecured debts and on completion of an IVA. A debt write off amount of between 20% and 80% is realistic, however the debt write off amount for each customer differs depending upon their individual financial circumstances and is subject to the approval of their creditors.
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Free money help and advice can be found at the MoneyAdviceService.org.uk