Short-term unsecured loans are often used in unexpected times of need and can be a great way to bridge the gap between paydays. Life doesn’t always work out the way we’ve planned however, and sudden changes to your circumstances may arise out of the blue, which can put you in a difficult financial situation. In some cases, financial difficulty may be short-lived, and you can usually get back on track in no time. But what happens if you find yourself struggling for longer than you’d hoped, and next month’s pay-check just isn’t quite enough to repay your loan?

Talk To Your Creditor

Approach your creditors and let them know your situation. Creditors are not mind readers so they won’t know you’re struggling to repay your loan unless you tell them. They also understand that circumstances can change at any time so they’ll usually be happy to work with you to help you settle your loan easily, and as quickly as you can. Most creditors may have a process in place to assist you if you are unable to repay your loan, however if you’ve already spent some time reviewing your affordability, it could make working out a suitable plan a little easier. It also means you can be more involved in the process of getting your finances back on track. If you’re not completely sure where to start, there are a few things you can ask your creditor to help you with, such as:

Ask To Freeze Your Balance

You could be racking up extra debt in late fees and charges if your balance isn’t frozen, which can make an already difficult situation much harder than it needs to be. Requesting to freeze the interest on your loan will stop your balance from getting any bigger and may give you more time to discuss your options for repaying your debt. Some payday lenders may be able to freeze your balance as soon as you contact them while others may have a different process in place in order to action this. If you’re not sure what the process is with your creditor, there’s no harm in asking.

Ask Them To Set Up A Repayment Plan

Some customers worry that if they set up a repayment plan directly with their lender, they may have to pay more than they can afford however this shouldn’t be the case. Most lenders want to set up a sustainable repayment plan that you can afford as it’s much more time efficient and means you’ll hopefully be able to settle your loan in a much easier, affordable way. If you have a specific repayment plan in mind, be sure to let your creditor know as soon as possible. They may or may not agree to it, depending on their process - as this will differ from lender to lender - so it’s best to provide as much information as you can about your situation and your affordability so that you can both agree to a repayment plan that is fair and reasonable.

Debt Management Referral

There are a number of resources available for you to get help if you’re struggling with debt and one option may be contacting a debt management company. Some creditors may signpost you to debt management charities as you might benefit from their assistance. You can also get in touch with debt management charities yourself if you’re unable to set up a suitable repayment plan directly with your creditors. Debt management charities like StepChange and Citizens Advice provide free debt advice as well debt management, and with the latter, will usually speak to your creditors and arrange plans on your behalf. Some debt management companies may charge a monthly fee to set up your plan so it’s worth exploring the free alternatives first.

Let Your Lender Help You

Admitting you need help can be scary and asking for help scarier yet, but it’s never a good idea to bury your head in the sand and hope that your problems go away as in most cases, they won’t. Realising you’re struggling to repay and making a conscious decision to do something about it is half the battle. Ignoring it however, means that the debt continues to grow, which may make it harder to repay and lengthen the period of time you’ll be paying it back.

So, what if I can’t repay my loan? It’s not the end of the world. Remember that your creditor most likely has the same goal as you, which is to help you settle your loan as soon as you can. The earlier you let them know you’re having troubles repaying, the earlier you can arrange a plan to put things right again.