What to do when your payment holiday ends

Once your payment holiday (also called a payment deferral) ends – for credit cards, personal loans, store cards, catalogue loans, home credit, car finance, rent-to-own, buy-now-pay-later and payday loans –lenders will usually expect you to start making payments again. Your lender should contact you to explain what your future payments will be at the end of the payment holiday period.

Your new repayments are likely to be higher than before you took a payment holiday. This is because they’ll include the amounts you missed during your payment holiday, spread over the rest of your loan, and any interest that would have been due. If you can afford to make your payments again, you don’t need to do anything.

If you’ll struggle with repayments

If you’re continuing to have money problems as a result of the coronavirus situation, or if you’ll struggle with increased payments, contact your lender. They must work with you to offer solutions that fit in with your needs and circumstances. This could be short-term or long-term help.

Lenders are expected to:

  • work with you to provide support before you miss any payments
  • be flexible and use a full range of options to help ease any stress and anxiety you might be going through because of money problems
  • put in place affordable and sustainable repayment arrangements
  • take account of your wider financial situation including debts with other lenders and essential living expenses you may have
  • give you enough time to repay and not pressurise you into repaying your debt within an unreasonably short time
  • make sure your balance doesn’t escalate out of control once a repayment arrangement is in place
  • recognise and respond to your needs if you’re vulnerable.

This means they might offer to:

  • give you a further full or partial payment holiday (but only if they believe this is in your best interests)
  • extend the repayment term of your loan so that your monthly repayments don’t increase but you repay over a longer period of time
  • reduce the interest rate on what you still owe (for credit cards, you’ll still need to meet minimum repayments each month) or on the amount of the deferred payment
  • set up a realistic payment plan to make your repayments easier to keep up with
  • let you switch to a more affordable product
  • suspend, reduce, waive or cancel any interest, fees or charges.

Store cards and catalogues

Your lender is allowed to cancel your credit, store card or catalogue credit. However, if you depend on these credit products for meeting essential living expenses, such as rent, council tax, food and utility bills or for buying essential items such as school uniform or baby essentials, it’s important to let your lender know so they can work with you to find a way to support you.

Overdrafts

During the pandemic, banks have offered their customers who have been affected by the coronavirus situation a fee-free overdraft of up to £500 and a subsidised overdraft over that amount. You can ask your bank to make either of these two arrangements until 31 October. After that, , fees on overdrafts are likely to revert to normal rates, which can be around 40% with most banks. Your bank should let you know how much interest you will pay on your overdraft from 1 November 2020.

However, if you’re still having money problems after the end of October and will struggle to repay this overdraft, let your bank know that you’ll need more support.

The different options that banks can offer you include:

  • reducing or waiving the interest on the overdraft for a period of time
  • transferring the amount you owe on your overdraft to a loan that will allow you to repay the debt over a period of time on a reduced interest rate
  • agreeing a programme of staged reductions in the overdraft limit (and balance) – also known as a repayment plan

Your bank shouldn’t reduce the credit limit or suspend or remove your overdraft facility if you’re still struggling financially and doing this would cause you financial hardship.

Impact of further support on your credit file

If your lender does offer you further support once your payment holiday ends, this will be recorded on your credit file. This could mean that you may find it more difficult to borrow money in the future.

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