Missing a loan payment can be stressful, and it may have financial consequences. Whether it’s a personal loan, car finance, or a mortgage, lenders take missed payments seriously. If you don’t act quickly, you could face late fees, damage to your credit score, or even legal action.
In this guide, we’ll explain:
The immediate and long-term consequences of missing a loan payment
What to do if you’ve missed a payment
How to avoid missing future payments
Your rights and protections under UK law
If you’re struggling with repayments or have already missed one, this guide will help you take control of the situation.
What Happens If You Miss a Loan Payment?
1. You’ll Likely Incur a Late Payment Fee
Most lenders charge a late payment fee when you miss a scheduled repayment. The amount varies depending on your lender, but it can range from £10 to £50 or more.
2. It May Affect Your Credit Score
When you miss a loan payment, it is usually reported to credit reference agencies like Experian, Equifax, and TransUnion. A single missed payment can lower your credit score, making it harder to get credit in the future.
The impact depends on:
How late the payment is
Whether you catch up quickly
Your overall credit history
3. Your Lender May Contact You
If you miss a payment, your lender will likely send reminders via email, phone calls, or letters. They may give you a short grace period to make the payment before taking further action.
4. The Debt Could Be Passed to a Collection Agency
If you continue missing payments, your lender might pass your debt to a debt collection agency. This can be stressful, as debt collectors will pursue payment aggressively.
5. Your Loan Could Be Defaulted
If you miss multiple payments, your loan may enter default status. This means the lender considers your account too delinquent to continue as agreed. Defaulting on a loan can have serious financial consequences, including:
A major drop in your credit score
Legal action to recover the money
Difficulty obtaining loans, credit cards, or mortgages in the future
6. You May Face Legal Action
If you continue missing payments and fail to work out a solution with your lender, they may take you to court. In extreme cases, they could obtain a County Court Judgment (CCJ) against you, which can stay on your credit file for six years.
What to Do If You’ve Missed a Loan Payment
If you’ve missed a loan payment, taking quick action can prevent further financial damage. Here’s what you should do:
1. Check How Late the Payment Is
If it's only a few days late, you might be able to make the payment without major consequences.
If it's over 30 days late, it could already be reported to credit agencies.
2. Contact Your Lender
Don’t ignore the situation—reach out to your lender immediately. Many lenders offer repayment plans or temporary payment holidays if you're struggling.
3. Catch Up on Payments
If possible, make the missed payment as soon as you can. Some lenders may agree to waive the late fee if you explain your situation and pay promptly.
4. Negotiate a Payment Plan
If you can’t afford to pay in full, ask your lender about setting up a repayment plan. They may be willing to:
Reduce your monthly payments temporarily
Extend your loan term to lower repayments
Offer a short payment holiday
5. Check Your Credit Report
If your missed payment is reported to credit agencies, it’s important to check your credit report to see the impact. You can get a free credit report from:
Experian (experian.co.uk)
Equifax (equifax.co.uk)
TransUnion (transunion.co.uk)
6. Get Debt Advice If Needed
If you’re struggling to keep up with multiple loan payments, speak to a free UK debt charity such as:
StepChange (stepchange.org)
National Debtline (nationaldebtline.org)
Citizens Advice (citizensadvice.org.uk)
How to Avoid Missing Future Payments
To avoid missed payments in the future, follow these steps:
1. Set Up a Direct Debit
Automating your payments ensures they’re always made on time, reducing the risk of forgetting.
2. Budget for Loan Payments
Make sure your loan repayments are accounted for in your monthly budget. Prioritise essential expenses like rent, food, and loan payments before discretionary spending.
3. Build an Emergency Fund
If possible, set aside money each month to cover unexpected financial setbacks, such as job loss or unexpected bills.
4. Consider Loan Protection Insurance
Some lenders offer payment protection insurance (PPI) or other cover that can help in case of redundancy, illness, or financial hardship. However, read the terms carefully to ensure it meets your needs.
FAQs
1. Will missing one loan payment ruin my credit score?
A single missed payment can negatively impact your credit score, but the severity depends on how late it is and your overall credit history.
2. How long does a missed payment stay on my credit report?
Missed payments stay on your credit report for six years, but their impact reduces over time if you keep up with future payments.
3. Can I reverse a missed payment record?
If the missed payment was due to an error (e.g., a banking issue), you can dispute it with the lender or credit reference agencies. Otherwise, you’ll need to rebuild your credit over time.
4. What happens if I miss multiple payments?
Repeated missed payments can lead to:
Loan default
Debt collection
Legal action (CCJ, bankruptcy in severe cases)
5. Can I get a new loan if I have missed payments on my record?
It will be harder to get approved for credit if you have a history of missed payments. You may need to rebuild your credit score first.
Final Thoughts
Missing a loan payment can lead to late fees, a lower credit score, and even legal trouble if not addressed. If you’ve missed a payment, act quickly by contacting your lender and exploring repayment options. To prevent missed payments in the future, set up direct debits, budget carefully, and seek financial advice if needed.
Subscribe for more tips! Subscribe to our newsletter
Disclaimer: Smart With Money may receive compensation from affiliate links, advertisements, and partners featured on this site. This compensation does not influence our editorial content, reviews, or recommendations. Our opinions are our own, and we aim to provide accurate and objective financial information to help you make informed decisions.
Additionally, all content provided on SmartWithMoney.co.uk is for informational purposes only and does not constitute financial advice. Please seek independent financial advice before making any financial decisions.