Some loan types and lenders may levy a penalty for prepayment of loans. To determine if you can deduct any penalties, contact your lender.
Penalty for a Late Payment
If you don’t pay your loan off on time, you could face a penalty. This is the amount of money that is owed to the bank, building society or other lender. The amount you have to pay is determined by your bank, and can be up to 10 per cent of the balance (for example, if your loan balance is 4,000, the penalty could be as much as 2,000 pounds).
You can appeal if you think the penalty is too high or you think your lender is charging too much.
There are different levels of penalties. See our penalties guide to find out which type you’re currently on.
What will happen if I do not pay?
Your lender can:
take legal action to stop you from repaying
try to collect your debt from you by taking you to court
pay you in full when you have paid in full when your defaulting debt is paid in full by your lender
Contact the lender directly to find out if you can pay off the debt
For more information about repaying your debt, visit our page on debt.
If your lender gives you a written warning that your credit rating has been affected because of the debt, you won’t get a credit limit increase until you pay it off.
Your credit limit is automatically increased when you pay your balance in full.
How do I use my credit limit?
Your credit limit is used for:
unsecured credit, such as credit cards and personal loans
unsecured consumer debt, such as credit cards and personal loans
business credit, such as mortgages, lines of credit, and loan modifications
You can use your credit limit to buy products and services from companies you’ve authorized to charge you fees. When you use your credit limit, you’re still responsible for paying off your debts. The fee schedule on your credit card, business loan, line of credit, mortgage, or loan modification statement will indicate the fees charged on those products. If you have a balance due, that balance must be paid off before you can use your credit limit to pay off your debts. You will also need to repay all the debt you owe if your credit limit is limited or if your account is in default. Credit limit restrictions The credit limit restriction you set on your credit card can have an impact on the amount of money you can borrow and the amount of interest you can pay, although there are services online that offer emergency loan bad credit for people with not enough good credit. If you are planning to buy or renovate a home, your credit limit will be limited if you don’t have enough to cover the cost. If you have a high credit limit, your costs may be affected, but you can still open and use a credit card. For example, if your credit limit is limited, you won’t be able to use the card to pay for other expenses.
You can’t open a new credit card if your credit limit is higher than your annual fee or if the card issuer has rejected your application for new credit. If your credit limit is higher than your annual fee, the credit card issuer may consider you “high risk” to your credit score. If you want to open a new credit card, you may be better off paying off some of the outstanding balance.