{"id":131838,"date":"2018-04-03T06:58:17","date_gmt":"2018-04-03T13:58:17","guid":{"rendered":"https:\/\/www.finder.com\/uk\/?p=131838"},"modified":"2023-11-21T10:49:58","modified_gmt":"2023-11-21T10:49:58","slug":"what-happens-when-loan-company-goes-out-of-business","status":"publish","type":"post","link":"https:\/\/www.finder.com\/uk\/personal-loans\/what-happens-when-loan-company-goes-out-of-business","title":{"rendered":"What happens when a loan company goes out of business?"},"content":{"rendered":"
Late repayments can cause you serious money problems. See our debt help<\/a> guides.<\/div><\/article>

It used to be the case that your local bank or building society was the only place to get a loan. But with the rise of fintech lenders, it\u2019s now very easy to get financing without leaving your home. But what if one of these companies (or one of its more traditional counterparts, for that matter) simply fails? <\/p>

Some online lenders go bust after unsuccessfully experimenting with alternative, non-standard types of financing. Case in point, the collapse of payday loans company Wonga<\/a>.<\/p>

Other lenders might be shut down for legal reasons, and some startups simply can\u2019t make it through those tough first few years. And anyone who remembers the 2008 financial crisis knows that big-name banks can go South too.<\/p>

We take a look at what happens when a lender closes and the steps you should take.<\/p>

If my lender shuts down, do I still have to repay the loan?<\/h3>

Yes. When you borrow money, you sign a legal contract containing specific terms and conditions related to your payments, rates and more. The legal status of your contract doesn\u2019t change when your lender shuts down.<\/p>

In fact, you might not notice much of a difference in your repayment experience after a lender goes bust. That\u2019s because any outstanding loans owed to the collapsed company are effectively its assets, that will be sold off by administrators to repay the company\u2019s creditors. Another company simply buys your loan and starts receiving your repayments, with the same terms (unless otherwise specified).<\/p>

What happens if I stop making repayments?<\/h4>

Your new lender will inevitably notice, and the lapse can seriously damage your credit score. Depending on why your original lender shut down, it\u2019s possible that your new one will be even better<\/em> at keeping track of your repayments.<\/p>

As well has significantly hurting your credit record, payments that are more than 30 days late can ultimately lead to a county court judgement (CCJ). These are in turn likely to have a further serious impact on your credit report. Any defaults could follow you around for years to come, making it difficult to qualify for future loans, credit cards, mortgages and more.<\/p>

Here\u2019s what typically happens to your loan when a lender shuts down<\/h3>

The most immediate action is that your lender stops funding loans. This typically won\u2019t affect you unless you want to apply for a new loan or new financial product.<\/p>

After funding ceases, one of three things happen:<\/p>

  1. Your lender continues to collect repayments until every loan is paid off.<\/li>
  2. Another lender buys your lender\u2019s portfolio.<\/li>
  3. The Financial Conduct Authority (FCA) will outline certain criteria and regulations which will ensure existing debts are paid off by customers to a new lender or bank.<\/li><\/ol>

    At this point, you should receive notification from your lender or the new company you\u2019ll be paying to. More than likely, your loan terms and conditions remain the same.<\/p>

    Borrower checklist<\/h3>

    When a new company buys your loan, here\u2019s a few ways to keep on top of what you owe:<\/p>