What happens if I default

If you default on a loan, it will have a significant impact on any attempts to gain credit in the future as it will give you an adverse credit history and lower your credit score. You will receive a default loan notification, which you will need to react to immediately.

If you default on your loan, the lender may take action to recover the money. The lender will also notify any national credit bureaus of your default. This can have huge affects on your credit rating for a long time. You will also be reliable for any expenses incurred in collecting the money you owe them e.g. implementing a debt collection agency will incur extra charges being added to your loan.

You will be charged for the default – they can add another charge onto your loan simply because you have defaulted. They may pass the loan onto a debt collection agency which will incur lots of other extra charges.

You may be issued with a County Court Judgement which is a legal instruction issued by a court when you have failed to repay the money. This will also end up in other costs being added onto your loan as they will charge your for any solicitor fees incurred.

You may struggle getting other financial commitments such as phone bills, car finance, trouble getting a tenancy, will have massive effects on getting a mortgage, etc.

What do I do if I receive a defaulted loan notification

Do not ignore it! The longer you leave them, the worse the situation will become so you need to acknowledge it straight away and start to do something about it.

The lender may give you a repayment plan option. Speak with your lender and try and come to some sort of agreement on a suitable repayment plan.

Another option for you is to get advice from a debt solution company. If you register with them, they will speak to the lender with you and they may even be able to negotiate lower repayments for you.

How to avoid a default

Speak with your loan provider! Communication is the key, speak with them and explain your current situation. They may be able to help you and change your repayment date to ensure you have some money in your account and to minimise the chances of defaulting on your loan. See what options are available to you and make sure you take action.

Debt Collection Agencies

These are the people, totally separate from your loan provider, who are hired to get the money that you owe back. They normally won't be used until several months of your repayments have been missed. You usually will be sent a letter from an agency that you have not heard off, this will be a notification letting you know that a debt collection agency has been applied to your loan.

Credit harassment is quite common, especially in the sub prime loan market. Constant phone calls, letters and even people knocking at your door is very common. If a debt collection agency is chasing you for money that you simply do not have, you may want to look at other forms of debt solutions. You can look into Individual Voluntary Agreements (IVA's) which are for more serious debts over £15,000 or a Debt Management Plan which is used for much smaller, personal debts.

If you have received a statutory default notice as a result of defaulting on your loan, a debt solution may be the better option for you and this will stop the creditor harassment.

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