STRUGGLING credit card, loan, car finance and pay day loan customers will be given extra time to pay their bills due to the second lockdown.Borrowers
STRUGGLING credit card, loan, car finance and pay day loan customers will be given extra time to pay their bills due to the second lockdown.
Borrowers who haven’t already taken a payment holiday since July will be able to ask for one from their lender and it will last for up to six months.
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The Financial Conduct Authority (FCA), the financial regulator, has proposed an extension of the support after the government confirmed over the weekend that England is going back into lockdown from tomorrow.
The payment holidays, first announced in March and then extended in July, were due to end on October 31.
The proposals would mean that:
- Those who haven’t had a payment holiday will be eligible for two payment deferrals of up to six months in total
- Those who’ve already had one payment holiday will be eligible for a further payment deferral of up to three months
- High-cost short-term credit customers, such as those with payday loans, who haven’t yet had a payment holiday will be able to pause repayments for one month
- If you’ve already had two payment holidays, you should contact your lender for tailored support
Under the proposals, borrowers would have until January 31, 2021 to request an initial payment deferral.
The FCA said the payment holidays would not be reported as missed payments on a borrower’s credit file.
However, it added that requesting one may still affect your ability to get credit in future, as lenders take into account a wide range of information before making a lending decision.
How to cut the cost of your debt
IF you’re in large amounts of debt it can be really worrying. Here are some tips from Citizens Advice on how you can take action.
Check your bank balance on a regular basis – knowing your spending patterns is the first step to managing your money
Work out your budget – by writing down your income and taking away your essential bills such as food and transport
If you have money left over, plan in advance what else you’ll spend or save. If you don’t, look at ways to cut your costs
Pay off more than the minimum – If you’ve got credit card debts aim to pay off more than the minimum amount on your credit card each month to bring down your bill quicker
Pay your most expensive credit card sooner – If you have more than one credit card and can’t pay them off in full each month, prioritise the most expensive card (the one with the highest interest rate)
Prioritise your debts – If you’ve got several debts and you can’t afford to pay them all it’s important to prioritise them
Your rent, mortgage, council tax and energy bills should be paid first because the consequences can be more serious if you don’t pay
Get advice – If you’re struggling to pay your debts month after month it’s important you get advice as soon as possible, before they build up even further
Groups like Citizens Advice and Money Advice Trust can help you prioritise and negotiate with your creditors to offer you more affordable repayment plans
The industry now has until 10am on November 6 to give feedback on the proposals, so the FCA is urging customers not to contact their lenders yet about the payment holidays.
Customers who have already taken advantage of the two payment breaks but are still struggling are advised to talk to their lender.
Extra help is still available to those struggling as of November but it will be tailored depending on individual circumstances.
These measures include having the debt interests and charges cancelled but it will be marked on their credit history.
A bad score can affect whether your application is accepted, how much interest you pay, and how much you can borrow.
While it’s better than missing a payment without speaking to your lender first, Martin Lewis previously warned that you should only apply for a holiday if you really need it.
Borrowers still accrue interest throughout the break, which will cost them more in the long run as the balance will be higher than if they continued making the repayments.
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Mortgage payment holidays have also been extended for six months – but only for new applicants.
MoneySavingExpert has previously warned that taking a payment break may actually stop you from getting a mortgage, even though they won’t affect your credit score.
They said that lenders can then see whether you’ve paused any payments through other methods, like Open Banking, which they can then use this information to decide whether or not they will lend to you.