Bank Loan Debt

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.

Struggling to pay loans?

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.

What happens if you don’t pay a personal loan?

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 phone calls and reminder letters from the bank requesting swift payment.

If you can’t pay back your bank loan, and continue missing payments, you could:

• Be charged a late fee as well as additional interest.
• Suffer legal action in the form of a county court judgement.
• Your debt could be passed to a collection agency – they may send bailiffs to reclaim what’s owed.

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:

Did you know?

Do you bank with the same company where you got the loan? If so, your provider may take funds from your account to repay the debt – sometimes without notice.

How to get out of a personal loan

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 a bank loan to pay off debt

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.

Did you know?

At the end of December 2020, people in the UK owed £1,696 billion*.

* According to The Money Charity, 'The Money Statistics February 2021', February 2021.

How can an IVA deal with my bank loan debt?

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 adhere to the terms of the IVA if it is approved.