What to do when your coronavirus rent to own (RTO) payment holiday has ended

If you took out a rent to own 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 rent to own?

You might have a rent to own (RTO) agreement if you’re making weekly or monthly payments for items such as furniture, household appliances or electrical goods, like TVs or games consoles.

With rent to own arrangements, you usually can buy the item outright at some point during the agreement, hence the name.

Find out more about how rent to own agreements work in our guide.

What was a rent to own payment holiday?

The following will have happened during the payment holiday:

  • lenders haven’t been allowed to repossess goods
  • you haven’t had to pay extra charges if social distancing measures have stopped lenders from taking payment or collecting goods
  • interest would have still been charged and you may have agreed to make small token payments
  • any warranty or insurance you had as part of the agreement may have been extended for the three months.

Taking the payment holiday won’t have had an impact on your credit file, 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.

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

If you took out a rent to own (RTO) payment deferral because of coronavirus it likely will now have ended or be coming to an end.

What happens when your rent to own payment holiday is over?

Repayments will restart automatically after your payment holiday ends.

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

Lenders were banned from repossessing your goods until January 2021 if you still needed the goods but were facing temporary financial difficulties and unable to meet your payments.

Although they can now repossess goods if you fail to make payments, this should only be done as a last resort, and subject to complying with relevant government public health guidelines and regulations – for example on social distancing and shielding.

What if I had warranties or insurance on my rent to own goods?

The Financial Conduct Authority (FCA) requires lenders to consider the impact on warranties or insurance they sold or arranged.

This means, where possible, your rent to own lender should have kept any insurance and warranties in place during your payment holiday and should extend these if your agreement length is extended when your payment holiday is over.

This might not be possible if your insurance or warranty was sold by a third party, but your rent to own lender should still make you aware of the implications of this for you.

Our Budget Planner helps you see if it’s possible to cut back on costs and free up some extra cash.

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

The coronavirus outbreak will have affected 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 RTO 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 affording payments, 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 rent to own 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 rent to own 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 rent to own 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 deferral 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 rent to own lender?

If you don’t contact them, rent to own 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 free confidential debt advice online, over the phone or near to where you live using our debt advice locator tool.

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