Can you get a payment holiday for your commitments?

If you’re struggling to pay your bills due to the coronavirus crisis, the deadline to apply for a payment holiday is fast approaching

The coronavirus crisis has fundamentally changed the way we live, with lockdowns shutting down parts of the economy and forcing many businesses to close. Sadly many people have lost their jobs or been put on furlough, leaving them with less money to pay their bills.

If your household income has taken a hit due to the pandemic, it’s important to know you have options. You can still apply for a payment holiday from lenders but you’ll need to hurry – the deadline is Wednesday 31 March 2021.

Payment holidays are available for up to six months. Generally, providers will offer you a three-month payment freeze to start with, after which you can resume payments or ask to extend until you reach the six-month limit. If you still need help after a six-month payment holiday, your lenders should work with you to offer you additional support.

Payment holidays are available on a number of borrowing options and finance agreements, including:

• mortgages
• personal loans and credit cards
• insurance
• car finance
  

Mortgages

Many people have struggled to meet their mortgage repayments during the pandemic, with 1.8 million payment holidays taken at the height of the first UK lockdown. If you want to apply, remember you’ll still need to pay interest. If you can afford it, take a partial payment holiday so less interest builds up.

If you’ve already taken a six-month payment holiday, your mortgage provider may offer:



• another payment deferral
• another period of reduced payments
• an extension to your mortgage term
• a change to your mortgage type

Personal loans and credit cards

During the first lockdown, more than 1.7 million loans, credit cards and store cards were on payment holidays in the UK. While this number has since fallen, many people still need support. If you apply for a payment holiday on your loan or credit card, bear in mind that interest will continue to be charged.

If you find yourself in a similar situation after six months, your lender will need to provide extra support and may offer:



• another payment deferral
• another period of reduced payments
• to waive or reduce interest
• to agree a repayment plan
• to refinance your credit agreement

Insurance

Before you apply for a payment holiday on your insurance premiums, ask your provider to review your policy and see if there are any other more suitable and affordable options. If you do take a payment holiday and are still facing financial difficulties after six months, your insurer may offer to do the following:



• review your policy
• another payment referral
• another period of reduced payments
• waive or reduce interest
• agree a repayment plan

Car finance

Are you finding it a challenge to make your car, van or motorbike finance payments during the pandemic? If so, you’ll be able to take a payment holiday, but remember that interest will continue to be charged. Consider taking a partial payment holiday if you can to avoid paying extra interest. If you need more support after six months, your lender may offer to do the following:

• another payment deferral
• another period of reduced payments
• waive or reduce interest
• agree a repayment plan
• refinance your deal

If you still need support from lenders after six months, bear in mind that this may affect your credit report.

Hopefully the demand for payment holidays should keep falling as vaccines continue to be administered and the world gradually returns to normal, but it’s good to know that help is available now if you need it.

We can help you explore the available options so get in touch.