Although the rules differ from country to country and state to state, we investigated whether or not you could face jail time, should you fail to repay a loan.
There are many different forms of loan and reasons for taking them out. One of the commonest forms of loan in the UK, is in the homeowner’s loan. This type of financing allows you to borrow money using your home as an asset. This means that your home is at risk, should you fail to meet your repayment schedule. However, what we want to answer today isn’t if you could lose your home, but if failing to repay could see you end up in jail.
Here is your quick reference guide to whether or not failing to repay a homeowner’s loan could see you making a trip to jail.
Different Types of Homeowner Loan
There are different types of loan available to a homeowner. First of all, you could take out a standard homeowner’s loan. These are simple affairs where you borrow the amount specified for the period specified. You then repay the loan in monthly instalments until you pay off the balance.
Secondly, as a homeowner, you still have access to a standard personal loan. This type of loan does not use your home as an asset. While the original homeowner’s loan takes your house as backing to ensure you make repayments promptly, this type of loan does not. You have less risk because of this. If you fail to repay, the chances of losing your house are far lower. Unfortunately, this type of loan for house owners is more expensive than the other types because lenders see you as a greater risk.
A HELOC is not your average home improvement loan. A HELOC stands for Home Equity Line of Credit. This type of loan for homeowners allows you to borrow up to 80% of the value of your home, less what you might still owe on the mortgage. You borrow once and only pay interest on the amount you borrow. These loans are better for ongoing projects with no fixed prices, such as making improvements to your property.
Factors Impacting Whether you might go to Jail or not
Where you live in the world affects whether or not you can go to jail for failing to repay a loan. There is also the matter of fraud to consider. Have you taken out multiple loans that you have no intention of repaying? If so, the authorities might see this as fraud. In the case of fraud, you could well go to jail for taking out loans.
Otherwise, those living in certain parts of the world won’t go to jail for failing to repay a loan. You cannot be arrested for failing to repay a student loan debt, or for being past-due payments on your credit card in the UK. The chances are in your favour that, if you live in the UK, nobody will arrest you for failing to meet repayments.
What to do if you Can’t Repay a Loan?
If you can’t repay your loan, there are options open to you. Talk to the Citizens Advice Bureaux, speak with your lenders to work out a repayment plan you can afford, or visit Money Matters, the government run advice service.