Could I be taken to court if I can’t pay back a loan?

Could I be taken to court if I can’t pay back a loan?

Working with your lender if you struggle with repaying a loan is key to avoiding any serious issues.

Choosing a responsible lender who only lends money when they are confident the repayments are affordable is vital to avoid having problems when you borrow money. And if your circumstances change and there are issues, you need to talk to the lender straight away.

Anyone applying for a loan needs to consider the consequences should they be unable to make repayments. But, if it happens, here we explain everything you need to know about the process regarding outstanding debts and going to court.

Is it actually possible to end up in court?

It is possible for you to have to attend court because of unpaid loan amounts. However, this is an extreme circumstance that only occurs when other attempts to resolve the situation have failed – a notification of a County Court Claim won’t ever just come out of the blue.

It’ll only happen if you have fallen behind with your repayments and not replied to repeated attempts to contact you by your lender. You could also be sent a County Court Claim if you don’t reach an agreement with them over unpaid amounts.

How to know if you’re going to receive a County Court Claim

If you do not respond to your lender’s repeated attempts to contact you about the money you owe, then things may have to be taken to the next level.

The first formal thing you would normally get is a letter telling you about arrears on your account. Following that, and if the arrears remain unpaid and the lender has not been able to contact you, a warning letter, also known as a default notice, may be issued. This will state that the lender will end the agreement due to non-payment if no action is taken. It may also include the lender stating that unless you repay your debt they may take legal action. At this stage, you can still settle your debt out of court, and that would prevent the situation from escalating further.

If you do not pay the amount requested, or speak to your lender about a potential repayment plan, the lender might make a claim at a county court claiming back the money owed.

At this point, you can settle the claim by offering and paying the amount owed, or file a defence if you disagree with the amount the lender says you owe.

Going to a county court is a last resort for lenders seeking any money they’re owed. You can avoid ever receiving letters warning about court action if you turn to the loan company for help when you’re having trouble paying.

If you have a CCJ registered against you and want to know what your options are when it comes to getting a loan in the future, you can read our article on the topic.

What happens if I can’t pay my loan?

Firstly, if you are struggling to make a repayment on your loan, don’t panic. If you are able to, speak to your lender as soon as you think you may not be able to make a payment as they may be able to make an arrangement with you to help you get your payments back on track.

If you're struggling with finances you can get free and neutral advice from StepChangeNational Debt Line and the Money Advice Service.

If you are a Provident customer and you are struggling with a payment visit our Loan Difficulties page for more information.

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