What to do if you can’t afford to repay your secured loan?
Financial circumstances can change unexpectedly, leaving you worried about meeting your loan payments. If you find yourself in this situation, here are some steps you can take to regain control.
What do I do if I can’t afford a secured loan?
Failing to meet secured loan payments can lead to late fees and charges. Continued missed payments may result in default, negatively impacting your credit score. Ultimately, lenders can reclaim debts using the equity in your home, and in severe cases, this could lead to repossession. If you’re having trouble with a secured loan, act quickly to address the issue.
How will missed payments impact my credit score?
Multiple missed payments may lead to defaults or CCJs, which could impact your ability to get credit in the future. While a few missed payments can be repaired over time, defaults and CCJs remain on your record for six years, although their impact reduces gradually.
Am I at risk of losing my belongings?
This depends on the type of loan you have. If you have a secured loan then yes, you are at risk of your collateral being repossessed.
However, if you have an unsecured personal loan, these do not directly involve your possessions. But, if you default significantly, collection agencies may seek your belongings or impose an attachment of earnings order.
What other options do I have?
If you can't afford your loan payments and have explored all avenues, consider seeking professional advice. Options like debt consolidation loans can help manage your finances. If your financial struggles are temporary, negotiating a payment break with your lender may help.
By taking these proactive steps, you can work toward resolving your financial difficulties and regaining control over your debts.
What steps should I take?
1. Acknowledge the problem
When financial difficulties arise, it can be tempting to ignore them, hoping they will resolve themselves. However, avoiding the problem often makes it worse. The sooner you confront your financial situation, the better. Taking proactive steps during tough times can lead to better long-term outcomes.
2. Talk to your lender
If you’re struggling to meet payments, don’t be afraid to speak with your lender. Lenders are used to working with borrowers facing financial difficulties and may offer various options to help you get back on track. This can include payment arrangements, temporary payment breaks or, reduced payments.
As a specialist lender, we assist individuals facing challenging financial situations. We recognise that life can throw unexpected obstacles your way, and we're dedicated to providing the support you need. With us, we value our customers and aim to guide you on the path to financial stability. Call free on 0800 980 6273 to be in touch with one of our friendly advisors. They will support you from start to finish.
3. Work out which debts are the most urgent
Assess all your debts and determine which ones are most urgent to pay. Focus on priority debts, such as your mortgage or secured loans, which could risk your property being seized if you haven’t paid.
It’s wise to tackle debts with the highest interest rates next. Create a list of your debts and put together a strategy for managing payments. You might also explore consolidating debts to simplify repayment.
At Central Trust, our debt consolidation loans are a good way to combine your debt into one monthly payment. You can borrow up to £250,000 with our debt consolidation loans.
4. Create a budget and a financial plan
Establishing a budget is crucial when managing financial difficulties. Start by listing your income and essential expenses, such as food, bills, and transportation using our budget planner. Allocate any remaining funds toward debt repayment, ensuring you stick to your budget to regain financial stability.
5. Speak with professionals
Many organisations and charities offer free, unbiased financial advice. Visit our Payment Difficulties page for a list of organisations that can help. You can access websites like the Citizens Advice, StepChange, and the Debt Advice Foundation which offer guides on managing your debts and improving your financial situation.
6. Consider a debt management plan
If negotiations with your lender don’t generate results, consider a debt management plan (DMP). This agreement can be made directly with your creditors or through a debt management company, allowing you to repay your debts at a more manageable rate. However, it is important to note that there are several risks associated with a DMP, such as fees for setting it up, a longer repayment period, and a potential negative impact on your credit file.
Summary
If you're struggling to repay your secured loan, there's no need to panic. Start by creating a budget to help you clearly visualise your financial situation. It’s essential to communicate with your lender as they can offer valuable support and guidance.
At Central Trust, we are here to listen. We understand that life involves more than just finances and you may not have the perfect credit score. If you’d like to speak with one of our advisors, please call free on 0800 980 6273. They will discuss your options with you and provide dedicated support every step of the way.
If you are thinking of consolidating existing borrowing you should be aware that if you are extending the term of the debt you may be increasing the total amount you repay. All loans are subject to status, and appropriate lending terms.
THINK CAREFULLY BEFORE SECURING OTHER DEBTS AGAINST YOUR HOME. YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON A MORTGAGE OR ANY OTHER DEBT SECURED ON IT.
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