PAYMENT holidays for loans, credit cards, car finance and pay day loans are set to be extended as England goes into a second national lockdown.
Borrowers who haven’t already taken a payment break 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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In March, the regulator told lenders to pause payments for three months for customers whose finances had been negatively affected by the coronavirus crisis.
In July, the Financial Conduct Authority (FCA) extended these breaks, which were due to end on Saturday, October 31.
But over the weekend, the Prime Minister announced that England would be going into a month-long lockdown from Thursday.
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 FCA said that it would keep its support for consumers under review as the Covid-19 pandemic evolved.
It is now working on how to implement the new schemes and urges customers not to contact their lenders just yet.
The city watchdog added that lenders will provide the information to borrowers as soon as it is made available and the plans have been confirmed.
Credit referencing agencies agreed that the first round of payment breaks would not affect customers’ credit scores.
It is unclear whether this latest support will be recorded on credit files if accepted.
Customers who have already taken advantage of a payment break but are still struggling are advised to talk to their lender.
Extra help is still available to those struggling from 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.
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.
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“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.”
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.