What to do when your coronavirus buy now pay later (BNPL) payment holiday has ended

If you took out a buy now pay later payment holiday because of coronavirus and it’s now come to an end it’s a good idea to get on top of the options available to you, especially if you’ve suffered a drop in income.

What is buy now pay later?

Buy now pay later agreements are also known as store finance. They’re a way for you to purchase goods on credit and pay for them usually after a set interest-free period, or in instalments.

While you can use this payment method at some high-street shops, it’s more commonly used by catalogues and online retailers. Common buy now pay later providers include Klarna, Clearpay and Paypal.

Some agreements will let you pay after a set period of time (hence the name), while others will let you pay for your purchases in instalments (sometimes called ‘slices’).

Find out more about how buy now pay later agreements work in this guide from StepChange.

What was a buy now pay later payment holiday?

Until 31 October 2020 you can apply to your buy now pay later lender for a three-month freeze on your repayments – known as a payment holiday or ask for an extension on your existing agreement.

In addition to not having to make repayments, the following will have happened during the payment holiday:

  • interest would have still been charged and you may have agreed to make small token payments
  • If you were in a promotional period, for example for 0% interest, your provider should have extended this by the length of your payment holiday.

Taking the payment holiday won’t have had an impact on your credit report, but missing future payments will. However, you should remember that your credit report isn’t the only thing future lenders will use to decide whether or not to lend to you.

See our guide to understanding your credit rating for more.

If you didn’t ask your provider for a payment holiday, your agreement will have been expected to continue as normal.

If you took out a buy now pay later (BNPL) payment holiday because of coronavirus it likely will now have ended or be coming to an end.

What happens when your buy now pay later payment holiday is over?

Repayments will restart automatically after your payment holiday ends unless you were in a promotional period.

The payments you’ve missed will be added to your balance. This means your monthly payments can go up when your payment holiday ends to cover the missed payments, or the term of your agreement will be extended.

If you’re still struggling financially from the impact of coronavirus you can also ask for a payment holiday extension of up to three months.

During this holiday your payments will either be paused or reduced.

Interest will continue to build up during any payment holiday. This means any payments you’ve missed including any interest accrued will be added to your balance, so only choose this option if you really need it.

If you take this option, any promotional period you’re in such as 0% interest will be extended by the length of the your agreed payment holiday.

Next steps if your income has dropped or you’re worried about making repayments

The coronavirus outbreak will affect many people’s finances, especially those who have been made redundant, placed on furlough or who have lost self-employment income.

If your income has dropped or you’re worried about making repayments you should discuss your situation with your buy now pay later lender as soon as you can and before your next payment is due. They’ll be more willing and able to help if you’re proactive and explain your situation.

Make sure you’ve claimed everything you’re entitled to

Check out our Coronavirus support hub to make sure you get everything you’re entitled to.

Make an emergency budget

If you’re worried about cashflow, have a look at what you’re spending and what income you have coming in.

Our Budget Planner will help you do this.

Look at how to cut your household bills, such as switching providers for your gas, electricity or mobile phone contracts.

Our My Money section has useful tips.

Find out how to save money and increase income to help you catch up with your payments on the StepChange website.

What’s the best way to contact my buy now pay later lender?

Call centres are very busy now. If you can’t get through, try emailing them or using online contact forms to put your query in writing. This could provide useful evidence later if a problem escalates.

What should I say to my buy now pay later lender?

You might feel nervous or embarrassed about asking for help, especially if you’ve never had to before. But lots of people are in the same situation, and firms are expecting calls from customers who have seen their income take a hit.

The sooner you get help, the sooner you can get back on track.

Think of the conversation as ongoing, rather than a one-off, until your finances are back on track.

What can my buy now pay later lender do to help?

If you continue to have money problems as a result of the coronavirus crisis, you may be entitled to extend your payment deferral if it’s in your interests.

There are several options your provider could consider, such as:

  • reducing or waiving your interest charges
  • lowering your monthly repayments
  • extending the term of your agreement.

Any previous payment holiday offered because of coronavirus and later deemed to be unsuitable should have any interest charged during this period waived.

What happens if I don’t contact my buy now pay later lender?

If you don’t contact them, buy now pay later lenders will normally follow this process:

  1. they may first ask you to get in touch by writing to you or calling
  2. they will then usually issue you with a written ‘default notice’. This gives you an opportunity to arrange how to catch up with your missed payments
  3. if you don’t deal with the debt, the loan will ‘default’. This will usually be after two to three missed payments
  4. once the loan has ‘defaulted’, more interest and charges could be added – increasing what you owe
  5. if you still haven’t responded to them, your lender may go to court to seek a County Court judgment (CCJ) (called a decree in Scotland). A CCJ gives your lender more options to enforce repayment of the debt. Bear in mind that these measures can seriously affect your ability to get credit with other lenders in the future
  6. the debt may eventually be passed to a debt collection agency (also known as bailiffs or sheriff officers).

Next steps if I have missed a payment

If you have missed a payment contact your lender to explain your situation. You should avoid taking out more credit unless you know you can afford to pay it back.

These guides can help you talk to your lender:

What to do if you’re struggling with something bought on finance on the Citizens Advice website.

Dealing with weekly payment store debt on the StepChange website.

When to get debt advice

If you’ve already missed payments and are not able to come to an agreement with your lender, it’s best to get advice as soon you can, especially if you’ve got other debts as well.

See our guide on how to prioritise your debts to help you work out which ones to pay off first.

Find out more on the StepChange website about how debts are collected when you are in arrears.

Citizens Advice have more information about how to make a plan to pay your debtsopens in new window.

Find free confidential debt advice online, over the phone or near to where you live using our debt advice locator tool.

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