TOMORROW is the final day for struggling Brits to apply for a payment holiday on mortgages, loans and other forms of debt.
Payment holidays offer breathing space if you’re struggling financially – but they should only be taken if you really need one.
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A payment break taken as part of the coronavirus proposals won’t be reported on borrowers’ credit files.
But lenders can still see whether you’ve paused any payments through other methods, like Open Banking, which could affect any future borrowing.
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.
But if you’re struggling and need a payment holiday, the deadline to apply for one is March 31, 2021.
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.
The deadline to apply for a payment holiday has been extended to 31 March 2021.
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.
If you have already taken the full six-month payment holiday, you cannot apply for a further holiday.
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.”
For those who’ve already been granted a payment break that hasn’t gone over six months, you’ll also be allowed to extend this help as long as you apply before tomorrow’s deadline.
If you’ve already had six months’ worth of a payment holiday, you won’t be eligible for a further break.
But you should still talk to your lender to discuss what options are available to you if you’re still struggling.
For example, they may be able to offer you reduced payments or other tailored support.
All payment breaks due to coronavirus will end by July 31, 2021.
More than 8 million Brits have had to borrow cash just to get by during the coronavirus pandemic, according to the ONS.
And national poverty charity, Turn2us say that one in three people have got into debt since the start of the pandemic.
We explain the different payment holidays you can get:
If you’re finding it difficult to keep up with your mortgage repayments, you can apply for a payment break.
But again, asking for a mortgage holiday shouldn’t be taken lightly – you should only really apply for one if you can’t afford your repayments.
This is because interest will continue to accrue during your payment break, which means your overall repayments will increase.
In fact, taking a mortgage payment holiday could cost you £2,769 in higher repayments.
Should you miss the March deadline, you still might be able to agree a payment holiday with your lender up until the end of July – although you’ll need to check if this is possible.
Credit card bills
Credit card and personal loan customers who are hard-up an apply for a payment break too.
But the same rules apply if you’ve already had a payment break of more than six months, you won’t be able to have another one.
If you’ve already had a repayment break but you’re still struggling to keep up, lenders may cancel your debt interests and charges.
How to improve your credit score
WE explain how to improve your credit score.
- Don’t make too many credit applications – Making lots of requests in a short period of time can be seen as a sign of financial distress – and each application will be recorded on your file. Use a “soft-search” eligibility calculator to show how likely you are to be accepted.
- Always pay your bills – Late payments are also recorded in your file so make sure you pay your monthly bills on time including utility and credit cards.
- Pay down your debt – Try and cut down your existing debt before applying for new credit as lenders may be reluctant to lend to you if you already have a large amount of debt.
- Use a credit-builder credit card – These cards tend to have high interest rates compared to normal cards but if you can show you’re a responsible spender with them, it can improve your chances in the eyes of lenders.
Lenders were told by the FCA last year they must consider suspending, reducing, waiving or cancelling any interest, fees or charges to prevent customer debts getting out of control.
It only applies to the debt incurred as a result of a payment break or free overdraft, as long as customers are keeping up with the agreed payment plan.
Buy Now, Pay Later
You have until the end of March to freeze your Buy Now, Pay Later repayments.
These schemes let customers pay for their shopping in interest-free monthly instalments to spread the cost, and common providers include Klarna, Clearpay and Paypal.
But if you’ve already taken a payment holiday, you won’t be able to apply for another.
As with all the other services, your payment holiday will come to an end on July 31.
According to the Money Advice Service, your repayments will restart automatically after this point and the ones you’ve missed will be added to your balance.
It says its in your interests to meet payments if you can afford to, but if you’re still struggling to cope after the payment holiday ends, you should talk to your provider as soon as you can.
The FCA clamped down on buy now, pay later providers in February, and these schemes will now come under regulation by the financial watchdog.
It comes as credit reporting firm Credit Karma warned shoppers could be spiralling into “unmanageable debt” after revealing Brits spent £2.3bn through these schemes to help fund spending over the Christmas period.
Car finance holidays
While you get back on their feet, certain car costs can be frozen if you’re struggling.
Car finance agreements that are eligible for the payment holiday, according to Money Advice Service include:
- personal contract plans
- personal contract hire agreements
- hire purchase agreements
- conditional sale agreements
- credit agreements to purchase a vehicle such as a credit sale
However, you should contact your car company to check exactly which agreements can be paused.
If you’ve already taken a payment holiday, you can’t apply for another one.
You have until March 31 to apply for a payment holiday, which will end before the start of August.
If you’re still struggling after this point to meet your repayments, you should talk with your car company about what additional help could be available to you.
High-cost short term credit holidays
High-cost short-term credit customers, such as those with payday loans, will only be able to apply for a one month payment holiday.
You have until March 31 to apply for one and it will end July 31.
And once again, if you’ve already taken a payment holiday, you can’t apply for another one.
If you still can’t meet the costs, you may be able to extend your payment holiday or ask for further help by talking to your lender.
You can take out a pawnbroker payment holiday if your finances have taken a hit due to Covid.
You have two weeks left to apply for it, and like nearly all the other payment holidays, it will come to and end on July 31.
This means you’ll have more time to recover the item you pawned, as the pawnbroker should suspend the sale under the payment holiday.
If you’re coming to the end of your payment holiday and are still struggling, take to your lender about what help is available.
They should provide tailored support which is suitable for your personal circumstances.
A ban on bailiff evictions has also been extended until the end of the month.
Find out how much better or worse off you’ll be using this tax calculator following this year’s Budget announcement.
The Budget also revealed the Government will trial a no-interest loan scheme to help low-income households pay off any unexpected debts.