What happens if i’m unable to repay my loan?

Taking on loans can often be a stressful experience, especially if unforeseen circumstances mean that you are unable to pay them back. The key to any loan is to make sure you can pay them back before you take them out, as otherwise you will generally just have to pay more money and your credit score will be harmed. This guide will give you tips on how to avoid that situation happening to you. It will also outline what to do if you should find yourself unable to pay back your loan, as there are still options available.

In This Guide:

How to stop this from happening

When you cannot make the minimum payment on a loan, you are at risk of getting what lenders call ‘blacklisted’. This means that you will have a bad mark on your credit score which will make it harder for you to borrow in the future. Before discussing what happens when you cannot repay a loan, it is important to first set out different ways to avoid this happening in the first place.


Budgeting is the most sure fire way to avoid going into large amounts of debt and being unable to repay your loan. The quickest way to do this is to make a list of all of your essential expenses and how much this will cost you. From there you can figure out what is an acceptable amount to save, and what you can spend on other things. The key is planning ahead, then there will never be surprises.

Improving Your Credit Score

Your credit score doesn’t just matter when you are applying for a loan. In fact, your credit score will affect the interest rates on the loan you already have. Therefore, it is important to try and build up your credit score in order to get better interest rates, which will save you money long term. You can build your credit score through taking on loans and paying them back on time and in full.

Debt Consolidation

In certain instances, it might be worth putting all of your debt into a debt consolidation loan. Here, a lender will take on all of your debt in return you pay them a monthly repayment fee. This will work through either them giving you the money to pay your creditors, or the consolidator paying it themselves. Because this is a longer term loan you will most likely pay more overall, but it is a more simple and regular way to become debt free.

What are the consequences?

There are a few things that a creditor can do before they go to the courts in order to get the money back from your loan:

  • When you have a savings account with that creditor they can take the money out of that in order to pay back the loan.
  • If you have a ‘secured’ loan, meaning that you have put a high value asset up as collateral, they have the ability to take this asset as payment.
  • When they don’t have any collateral to take, they will often resort to a debt collection agency, who will come around to your house to take the money often resorting to taking some of your possessions as payment.

What should I do if I fall behind?

There are a few things that you can do if you do indeed fall behind. The biggest rule when it comes to repaying the debt, is that it will only get worse the longer you put off dealing with it.

Debt Review Consolidation

Debt counselling is used often in this situation. Here, a trained professional will negotiate with your creditors and create a plan that allows you to pay your debt off in a more manageable way. However this will mean that you cannot borrow any more money until your debt is paid off.


Often your creditor will allow you to restructure the loan, meaning lower monthly payments and a longer term to pay off the debt. However, because of the longer term this does mean that there will be more interest paid overall.

Easier than ever.
Start a FREE Quote