What Happens if You Miss a Loan Repayment?
Though the consequences of lateness on your loan repayment can include additional fees or legal action, there are also several options to mitigate these.
Taking out a loan is serious business. This is something you should know, considering all the checks required before you are approved for one. As a result, you know how important it is that you keep up with your weekly or monthly repayments. However, what happens when you miss a payment? This article will have the answers, along with advice on how to resolve the problem.
The steps to rectifying the situation
The good news is there are approaches you can take to solve any loan repayment issues you may be suffering. Loan brokers say that “the minute you realise you are in too deep and you have taken on too much is the minute you should contact [your lender]”.
If you don’t tell your lender you are having issues then quite simply they cannot help you. But you may be surprised at the assistance they are willing and able to provide, such as granting repayment extensions and freezing your interest. In the UK, you have rights as governed by the Financial Conduct Authority, and there are also debt advice services that can help you if your debt has become seemingly uncontrollable.
Yet going back to the repercussions of missing a loan repayment, below is what you can come to expect.
A warning and charges
Typically, the first consequence of missing a payment is that you’ll receive a warning from your lender – either in the form of an email or a letter, or both. This warning will notify you about the need to make the repayment as soon as possible.
It will also include any charges you may have incurred due to missing payment. This can include interest charges and additional late payment fees. If you’re already struggling with money, these charges can push you into an even bigger financial problem.
Credit report blemish
Even if you only miss one repayment due to forgetting the due date, this is still going to negatively impact your credit score. This isn’t good for a number of reasons. For a start, it could make it more difficult to take out a different loan in the future.
Alongside that issue, a damaged credit score will lead to issues that range from being rejected for credit card applications to missing out on securing a mortgage for a new home.
Threats of repossession
Missing just one loan repayment is bad enough. However, what happens if you miss several repayments in a row? Well, along with a default notice, you could find a lender throwing out threats of repossessing your car or home.
You might also not have to deal with your original lender. They can pass your debt onto a specialist debt collection agency, and this can lead to further trouble – such as court action being brought against you.
If a court decision goes against you, you will have to end up paying a lot more than the repayments you missed. Other fees will also be added on top, including court expenses and additional interest, leading to you being further out of pocket. It will also have a negative effect on your credit rating for multiple years.