I have been getting asked more and more, how to cancel or get out of a loan, and my answers will fall into two (2) categories:
Are you wanting to cancel the loan in the 14 day “cooling off” period?
Are you wanting to cancel a loan after the cooling off period?
Then there is the big question….why do you want to get out of the loan or cancel it?
If the reason you want to cancel or get out of an existing loan is affordability, that raises more questions and also options.
Cooling Off Period
When you take out a loan, or insurance policy, or enter into a contract for many services there is a 14 day cooling off period. This is a period of time you have as a consumer to cancel a contract. Here in the UK it is 14 days from the signing of the agreement.
Most lenders, insurers, etc, will make you aware of this cooling off period, and during this time should you cancel the contract, you are not liable and do not owe anything.
In the instance of a loan where the money has been transferred to you, you will need to return the full amount of the loan.
But what happens after the cooling off period, and you want to cancel a loan, or struggle with payments???
After The 14 Days
It is hoped and expected by a lender to do an affordability check prior to granting the loan. So as a borrower, if you feel within the cooling off period you will not be able to afford the loan, you can cancel.
It could be something in your financial position changes during this 14 day period, and you need to cancel the loan.
It is when you are past the 14 day period that it can get complicated.
Once you sign a loan agreement, you are pretty much locked in that loan agreement for the period of time specified in the terms and conditions. The only way out, is to pay the loan in full. Either via the monthly payments, of a lump sum payoff.
If you begin to struggle with affordability issues later in a loan, there are options, and the first option or port of call is to speak to the lender. They may have in-house options to help you, such as a payment holiday, recast or rewrite the loan for reduced payments.
Depending on your full set of circumstances, there are debt management options, such as a Debt Management Plan, Token Payment Plan, and even insolvency options such as a Debt Relief Order, IVA/Individual Voluntary Arrangement, and even Bankruptcy.
The bottom line (pun intended), is that once you enter into a loan agreement, it is a legally binding contract. And you only have the 14 day cooling off period to end it without going down the other debt management routes.