Covid -19 and Payment Holidays
During the pandemic, the majority of creditors have allowed their customers to take payment holidays on their credit accounts if they have been financially impacted by the Coronavirus.
Will taking a payment holiday affect your credit rating?
If you have agreed a payment holiday with your lender, provided you were not previously in arrears this will not be noted on your credit file. However it can still be noticeable to creditors when making further credit applications as the balances on your accounts will not have reduced, therefore potentially impacting their decision when choosing whether or not to approve your credit application.
How long can you have a payment holiday for?
If you have not yet taken a payment holiday you have until 31st March 2021 to request one, A date that was agreed by the FCA to align with the current furlough scheme offered by the Government.
Lenders are offering a total of 6 months payment holidays, although they may only pre agree 3 months and then you would have to contact them again for a further 3 months should you wish to.
These 6 months may be taken consecutively or they can be split up. For example if you took 4 months payment holiday in April 2020 to July 2020 and then resumed payments you could ask for a further 2 months now in January 2021.
You also need to be aware that whilst you are taking payment holidays interest is not frozen, so you will end up paying slightly more.
Therefore if you are able to make payments it is best to keep doing so OR you can arrange to make part payments instead of a full payment holiday which will accrue less interest.
What if you are still struggling after your 6 months payment holiday?
If you have taken your pre agreed 6 months payment holiday and still cannot resume your contractual payments you can ask for tailored help. Tailed Support from your creditors will have a negative impact on your credit file.
- A (Further) Payment deferral – this would usually only be a short term measure that would only be offered if your circumstances were still changing and you were unable to commit to a reduced repayment plan long term.
- A (Further) period of reduced payments – Again this solution may only be offered in the short term, however you creditors may agree to continue to accept reduced payments from you whilst your circumstances were still changing.
- Waiving or Reducing the Interest – To avoid your debts spiralling out of control whilst you are unable to afford the repayments your lender would need to reduce or freeze the interest being added to the account.
- Agreeing a repayment plan – Working with the lender to agree a more affordable repayment plan, that is less than your current contractual payments.
- Refinancing a credit agreement – Depending upon your creditor they may be able to refinance your account with them spreading it over a longer period of time reducing the monthly payments making it more affordable. This may not be offered by all creditors and generally only available by those offering loans as well as creditor cards and only to those where it is deemed affordable and who’s finances are settled enough to commit to a new credit agreement.
Here are The Debt Advisor we are fully committed to helping and supporting individuals and businesses struggling with debts.
We know dealing with debts or communicating with creditors can be extremely overwhelming, however burying your head in the sand cannot be the answer.
Our friendly team of advisors are here to help. Whether you have been struggling for some time or you have found yourself in a situation you never thought would happen, we can talk you through your options giving you all of the information you require to make an informed decision.
Call us on 0800 085 1825 to speak to our Advisory Team.
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