What to Do If Your Cannot Repay Your Loan

What to Do If You Cannot Repay Your Loan Back on Time

Taking on loans can often be a stressful experience, especially if unforeseen circumstances mean that you are unable to repay your loan 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.

Borrowing from a Direct Lender

If you have borrowed money from a direct lender, and you are not able to repay your loan on time, you should contact your direct lender immediately. The benefits of doing this are they can help you come up with a concrete plan on how to make your repayments on time.

Some borrowers get into problems with their loans when they forget about them or when they bury their head in the sand. If you do this, then you will start to get financial problems, and it will be even harder for you to make your repayments on time.

Communication is key and you must do everything you can to tell your direct lender everything that is going on with your personal finances.

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 by 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.