One week left to apply for a three month mortgage, credit card or loan payment holiday

CREDIT customers who are struggling financially have just one week left to apply for a three month mortgage, credit card or loan payment holiday.

Lenders will stop offering the breaks from next month, meaning borrowers have until October 31 to apply for one.

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Struggling borrowers have one week until the deadline to apply for a payment break closesCredit: Getty Images – Getty

The temporary measures were introduced earlier this year to help households whose income has dropped due to lockdown restrictions.

The freezes can also be applied to insurance policies if you pay for them monthly, overdrafts, buy-now-pay-later, rent-to-own, car finance and pawnbroker loans.

Normally, payment breaks will be recorded on your credit file and can have a negative impact on any future borrowing, but earlier this year credit agencies agreed coronavirus freezes won’t be.

Extra help will still be available to those struggling from November 1 onwards but it will be tailored depending on individual circumstances and will be marked on their credit history.

What is a payment holiday and should you apply for one?

PAYMENT holidays are when a lender agrees to pause your monthly repayments for a set amount of time.

This has to be agreed in advance, so don’t stop making your repayments until your bank has given you permission to do so.

The majority of lenders are now offering payment holidays, so get in touch with your bank to find out what help it can give you.

You will need to do this before October 31 as this is when the blanket help is due to end.

Most of the time, it’ll require you to fill out an online form.

Typically, payment holidays are offered in extreme circumstances and are designed as an emergency measure to help you through a difficult financial time.

If you think you need to take one, you should speak to your lender to discuss your options – but do note that the break in payments doesn’t remove any debt or financial obligations.

Most lenders will also still charge interest during this time, so be aware that these costs will keep building up.

You should also always continue to make your normal payments if you’re financially able to.

Sue Anderson, head of media at debt charity StepChange, said: “If you can continue to make your normal payments without difficulty, then you should.

“Any temporary measures being offered by lenders don’t remove financial obligations – they are designed as an emergency measure to help you get through a period where your income may have taken a serious knock.

“However, if you need to use them then you shouldn’t hesitate to talk to your lenders.

“While taking a payment break would usually be noted on your credit file, the credit reference agencies have confirmed that, during the current crisis, this should not have a future influence on your credit status.”

It’s worth noting though that if you’ve already taken a three month payment holiday and you apply for a second on the same product before the deadline, the post-October 31 rules will apply meaning it will also be recorded on your credit file.

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.

For example, if someone paying £600 a month on a mortgage with a 12-year term left takes a three month holiday will typically need to repay the remaining balance over 11 years and nine months at a rate of £616 a month.

He said: “So if you don’t really need a three month holiday, don’t do it, or take a shorter break or make some voluntary repayments if you can.

“Yet if you’re struggling, do apply now and get the help you need. And with the deadline looming, my standard ‘only take it if you NEED it’ needs the addition of ‘or think you may really need it soon’, as future help is diminishing and these payment holidays are for most better than what will be available after October 31.”

Financial help for local lockdowns

HERE’S all of the extra help you can get if where you live has gone into local lockdown:

Up to two thirds of wages covered – Under the Job Support Scheme, the government will pay up to 66% of your wages if you can work because the business has been shut down by local restrictions.

£500 self-isolation payment – A new payment of up to £500 is available if you’re officially told to self isolate by the NHS, are on a low income and can’t work from home and this causes a loss of income.

Statutory Sick Pay – Anyone who must self-isolate and can’t work from home can get Statutory Sick Pay (SSP) of £95.85 per week if they qualify for it.

Income support for the self-employed – The new self-employed grant will cover 20% of average monthly profits, up to a total of £1,875, spanning November to January next year.

Taking payment holidays – You may be able to reduce your outgoings by taking a payment holiday on things like your credit card, mortgage or personal loan. You should speak to your bank, lender or provider to agree a break or reduction – never just stop making payments. These end on October 31.

Apply for a council tax reduction – You can apply for a council tax reduction on the Gov.uk website but you’ll need to meet certain criteria. Your bill could be cut by as much as 100 per cent if you’re on a low income or claim benefits. Carers who look after someone in the household for at least 35 hours a week are also exempt from paying.

Help if you can’t pay – If you find yourself struggling financially there’s always help available. Contact your bank or lender in the first instance if you’re struggling to keep up with repayments.You’ll also find support and advice from the following organisations for free:

MSE 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.

There are fears that households are going to have to tighten their belts even further in the coming months as hundreds of thousands of workers are expected to lose their jobs when furlough ends.

A lack of tiered support for people who live in areas where there are tougher local lockdown restrictions is also expected to push millions of families into debt, Citizens Advice warned yesterday.