If you cannot repay a bank loan, immediate action is critical. First, contact the lender to explain your financial situation and request a payment plan, deferment, or modification. Many lenders offer forbearance or restructuring options to avoid default. If negotiations fail, consider debt consolidation, selling assets, or seeking assistance from credit counseling agencies. In extreme cases, bankruptcy may be necessary, though it has long-term credit consequences. Prioritize transparency with the lender to avoid collections or legal action.

The effectiveness of these steps stems from data showing that proactive communication with lenders significantly reduces default risks. According to the Consumer Financial Protection Bureau (CFPB), 60% of consumers who contacted their lenders in 2022 successfully arranged payment adjustments, avoiding defaults. Lenders prefer resolving issues early, as collections cost 25% more than timely payments (Federal Reserve, 2021). Bankruptcy data from the American Bankruptcy Institute indicates that 70% of Chapter 13 filings in 2023 were due to unexpected financial shocks, highlighting the importance of timely intervention. Debt consolidation reduces interest burdens by 15-30% on average (National Foundation for Credit Counseling, 2022), while credit counseling agencies help 80% of clients avoid bankruptcy (NFCC, 2023). These strategies align with financial institutions’ incentives to minimize losses and maintain customer relationships. Procrastination, however, increases default likelihood by 40% (FDIC, 2020), underscoring the need for prompt action.