Personal Loan & Payday Loan Debt
Whether it's a bank loan, a high-cost short-term loan or a guarantor loan, unsecured borrowing can quickly become unmanageable when circumstances change. All of these can be included in a regulated debt solution.
Personal and bank loans
Fixed-term loans have a set monthly payment. Missing payments triggers arrears letters, default notices and possibly a County Court Judgment. Lenders are required by FCA rules to treat customers in financial difficulty fairly and consider options such as reduced payments or interest freezes.
Payday and high-cost short-term loans
Interest is capped at 0.8% per day and total cost at 100% of the amount borrowed, but rolling over or taking multiple loans is still a common route into serious debt. If a lender did not check affordability properly you may be able to complain and have interest refunded, even on repaid loans.
Guarantor loans
If you default, the lender will pursue your guarantor. Including a guarantor loan in an IVA or DRO protects you but not the guarantor, who remains liable. This needs careful discussion with an adviser and, ideally, the guarantor.
Your options
Loan debt is unsecured and can be included in a DMP, IVA, DRO, bankruptcy or the Scottish equivalents. Secured loans (against your home or car) are treated differently and must usually be maintained.
Frequently asked questions
Can a loan company take my car?
Only if the loan is secured on the vehicle (hire purchase, logbook loan or conditional sale). Unsecured lenders need a court order and warrant before any enforcement.
What is a default notice?
A formal notice under the Consumer Credit Act giving you at least 14 days to bring the account up to date before the lender terminates the agreement and demands the full balance.
How long can a lender chase an old loan?
A lender cannot normally start court action for an unsecured debt in England and Wales if six years have passed with no payment or written acknowledgement (five years in Scotland).
Want to know if this applies to you?
Free enquiry. No obligation. Regulated advice before any decision.