No, you cannot go to jail if you are unable to keep up with repayments on a loan. Borrowers who are struggling to keep up with their repayments may be worried of facing jail for this, however this simply will not happen.
Whilst those who cannot afford repayments on their loan do not face the prospect of jail, there are some issues that can arise from missing such repayments. It’s important to contact your lender as soon as you start struggling with your loan, as they can help you to come up with an alternative payment plan, which will be cheaper than simply not paying and ignoring their calls.
For borrowers who default on guarantor loans, the sequence of events can be fairly different. In this case, the guarantor of the loan will then be called upon to keep up with repayments. Click here to find out what happens if your guarantor does not repay.
If you can’t repay your loan, a certain chain of events will usually take place, this can include being taken to court or getting professional debt collectors involved. If you can’t afford to repay your loan, the following things can occur:
Whilst unexpected financial emergencies cannot be helped, it’s always important to check your financial situation before applying for a loan, ensuring to the best of your knowledge that you will be able to keep up with repayments. This, alongside the lender’s thorough affordability checks, can help to reduce the risk of borrowers struggling with debt in the future and accruing more charges.
After numerous attempts of taking the money owed from the borrower’s account, lenders will then attempt to contact them through any and all means of communication provided. This will be to try and settle the debt. All valid lenders are under the regulation of the Financial Conduct Authority (FCA), and therefore can only contact you a set number of times throughout the days and the weeks.
If all other means of communication fail, lenders may then have to resort to contacting your employer to try and reach you. It’s incredibly important to not avoid calls from your loan provider, and sort out any issues as soon as possible to avoid further penalties.
When defaulting on any form of credit, your credit score will normally be damaged as a result. When defaulting on a loan, the lender will send along this information to the UK’s Credit Reference Agencies (CRAs), which will then be added to your credit history and evaluated for your credit score.
Having a damaged credit score can restrict you when applying for credit in the future, as it makes you more high-risk, and therefore less likely to pay the loan back.
When defaulting on a loan, your lender may then begin to apply a daily interest onto the outstanding balance for as long as it remains outstanding. The amount of interest charged can vary from lender to lender, however it must be in keeping with the regulations set out by the Financial Conduct Authority (FCA).
If you’re struggling with loan repayments, you should always be straight with your lender, and contact them as soon as any issues arise. In doing this, borrower might be able to create a new, affordable repayment plan with their lender. Lenders might also be able to freeze and interest to help those who are struggling get back on their feet with repayments.