If you can’t repay your secured loan, the following can happen:
- Negative impact to your credit score
- Late fees charged
- Property could be repossessed
- Hard to get finance in the future
A number of fees and penalties can occur if you fail to repay your secured loan. That’s why it’s important to only take out a secured loan, or any loan for that matter, if you are confident that you can afford the loan and will keep up with repayments.
However, sometimes financial difficulties can hit us unexpectedly. If you’re struggling to keep up with the repayments on your secured loan, or feel you’ll struggle to keep up with them in the foreseeable future, here Lending Expert take you through the next steps.
How Do Secured Loans Work?
Secured loans work by securing a valuable asset (e.g. a property) on the loan. This asset is used as security should the borrower default on the loan.
If you fail to pay back a secured loan, this valuable asset will be repossessed, meaning if you’ve secured your property on the loan, you could be at risk of losing your home.
With a secured loan, as is common for loans in general, you’ll be required to make monthly repayments on what you owe in addition to any interest the lender has added as part of your agreement.
So long as you keep up with the repayments on a secured loan, you won’t be at risk of losing your asset/property and can actually boost your credit score by building up a good history of borrowing.
What Should I Do if I Cannot Repay My Secured Loan?
If you can’t repay your secured loan you should contact your lender as soon as you can and explain the situation to them. Your lender may be able to discuss an alternative repayment plan with you, which could make the repayments more manageable.
When discussing options with your lender, it’s important to ask them how the situation will affect you, for example, whether this will affect your credit score, whether you’ll be charged any late fees and if so, how much.
Can a Secured Loan Be Written Off?
It is very unlikely that a lender will write off a secured loan, as they are typically for large amounts of money, and are tied to a valuable asset such as your property. If entering into a secured loan agreement, you’ll have to pay back the loan.
Secured loans are classed as a type of priority debt. A priority debt can cause significantly large consequences if not paid back, and therefore, as their name suggests, are prioritised over other types of debt.
Secured loans are classed as priority debt since borrowers could risk losing their valuable asset (which can often be their home) if they don’t make repayments.
Will My Home Be Repossessed By Not Repaying a Secured Loan?
If you fail to keep up with repayments on a secured loan, and this loan has been secured with your home, you may be at risk of repossession by the lender.
However, if you contact your lender as soon as possible with any repayment issues, they may be able to work with you to try and arrange a more manageable repayment plan, and if kept to, will mean your home won’t be repossessed.
To discuss your secured loan requirements today, you can apply with Lending Expert here >>