What has changed for borrowers under pressure
The FCA's Consumer Duty rules, which came into full effect in July 2023, place a clear obligation on lenders to treat borrowers in financial difficulty with care. Lenders regulated by the FCA are required to offer forbearance, that is, practical support, to customers who are struggling to repay. This is not a goodwill gesture. It is a regulatory requirement.
MoneyHelper and StepChange continue to report high demand for debt advice, with missed loan payments among the most common reasons people contact them.
Why this matters
Missing a payment without warning your lender is almost always the worst outcome. Lenders can issue a default notice after a missed payment, and a recorded default stays on your credit file for six years. That affects your ability to borrow, rent a home, or in some cases take on certain jobs.
Acting before you miss a payment gives you more options. Acting after is harder, but still possible.
If you are worried you will miss a payment this month, the steps below are worth knowing.
Risks and warnings
Be careful about the following before taking any action:
- Applying for another loan to cover this payment carries serious risk. If you cannot afford the current payment, a new loan adds to the total debt. This may make your position worse, not better.
- Ignoring the payment can trigger default proceedings, late payment charges, and lasting damage to your credit file.
- Using a buy-now-pay-later or credit card to cover a loan payment moves the debt rather than resolving it. The underlying problem remains.
If you are already missing payments on more than one account, or using credit to pay for essentials, free debt advice is a safer starting point than any borrowing.
Free debt help:
- StepChange: 0800 138 1111 (free, confidential)
- National Debtline: 0808 808 4000 (free, confidential)
- MoneyHelper: 0800 138 7777 (free, backed by the government)
Who may be affected
- Anyone with a personal loan, car finance agreement, or credit card whose payment date falls this month and who does not have the funds available.
- People who have recently lost income, had unexpected costs, or whose income is irregular.
- Borrowers who have already used savings or emergency credit and have nothing left to draw on.
If the loan is secured on your home, the risk is more serious. A secured lender has the right to begin repossession proceedings if payments are persistently missed. Contact the lender and seek free advice as soon as possible.
What to do next
Step 1: Contact your lender directly, before the payment is due if you can.
Explain that you are unable to make the payment this month. Ask what support options they can offer. Under FCA Consumer Duty rules, lenders must consider forbearance options, which can include:
- A temporary payment holiday
- A reduced payment arrangement
- Restructuring the loan term
Any arrangement offered should be put in writing. Keep a record of all communication.
Step 2: Check whether your debt qualifies as a priority debt.
Priority debts, mortgage, rent, council tax, energy, carry the most serious consequences if unpaid. A personal loan is generally a non-priority debt. That does not mean it does not matter, but it does affect the order in which you deal with things. Free debt advisers can help you work out the priority order.
Step 3: Seek free debt advice if you are unsure.
You do not need to work this out alone. The organisations below offer free, confidential advice with no obligation:
- StepChange: 0800 138 1111 or stepchange.org
- National Debtline: 0808 808 4000 or nationaldebtline.org
- MoneyHelper: 0800 138 7777 or moneyhelper.org.uk
What to read next
- Debt consolidation: what it is and when it might help
- Personal loans: what to know before you borrow
- Getting financial advice: free and paid options
Sources
- FCA Consumer Duty guidance (fca.org.uk)
- StepChange Debt Charity (stepchange.org)
- MoneyHelper (moneyhelper.org.uk)