Ask Reena Sewraz: My ex won't pay back a £10,000 loan - what can I do?

Question: I took out a £10,000 loan for my ex-girlfriend in my name to pay off her debts. We have now broken up and she doesn’t want to pay me back. What are my rights?

You should never feel pressured to take out a loan for a loved one or someone you have met recently

Answer: Lending money to loved ones is often a decision we make with our hearts rather than our heads – but unfortunately, there isn’t any legal protection if you haven’t got any documents to prove the money you gave your ex was a loan.

A court is likely to presume you made a gift and, as the personal loan you took out is solely in your name, you will be legally responsible for the debt even though you borrowed the money on behalf of someone else. This means you will have to keep making the loan repayments for the remaining term of the agreement.

If you miss a payment or default on the loan, it will be recorded on your credit report. You could also be hit with a county court judgement (CCJ) or have your debt passed onto a debt collection agency.

All this will have a negative impact on your credit score and is likely to make it harder or more expensive to borrow in the future. So you might not be able to get a mortgage to buy a home, qualify for finance for a new car, or could be charged a higher interest rate on a new credit card.

The fact you were approved for a £10,000 loan suggests your lender believes you can afford the repayments based on your income and other debt commitments. However, if you are struggling to keep up with monthly repayments you should act fast.

Get in contact with your lender to find out what help it can offer you. Lenders that are signed up to the Lending Code must treat you fairly and offer assistance if you are in financial difficulty.

You may be able to freeze the interest on the loan or arrange a payment holiday while you get your finances in order. Just bear in mind that lenders may record the help you receive on your credit report (they have to tell you if this is going to be the case) which could be viewed negatively by other lenders you apply for credit with.

Alternatively, it may be possible to swap your personal loan to a provider that charges a lower rate of interest, but you’ll need to crunch the numbers to see if it’s worth it.

Call your existing lender and ask for a ‘settlement figure’ – which will be the total of the debt still owed plus any early repayment charge. Then compare this figure to the interest rate on the best new loan you may be able to qualify for, and see if the saving stacks up.

For example, a £10,000 personal loan repaid over three years at a rate of 9.9 per cent APR would cost over £320 a month and cost about £1,528 in interest. But at the moment a range of providers are offering loans of £10,000 repayable over five years for a rate of 2.8 per cent APR. This market-leading offer will usually only go to those with the best credit history, but if you were to qualify, repayments would be around £179 a month (£141 less) and you would pay £718 in interest.

While this loan was solely in your name, you should check if there are any other financial connections with your ex on your credit reports with the three main credit reference agencies Experian, Equifax and Transunion. If you spot any, update your accounts and ask the credit reference agency to break the links so that your ex-partner's financial situation doesn't have an impact on any credit applications you may make in the future.

You should never feel pressured to take out a loan for a loved one or someone you have met recently. Borrowing money is a major financial commitment and shouldn’t be taken lightly. If you are struggling with debts check out Which?’s guide on how to pay off your debts and where to find free debt advice.

Reena Sewraz, Senior Which? Money Editor