But in that situation, they should offer a different kind of help, such as waiving fees or interest. If it looks like a pause on repayments will push a customer into financial difficulty your lender can refuse to offer one. If you haven’t actually requested a payment arrangement, it will be recorded as a default, which will damage your credit file. Make sure you proactively contact your lender to ask for a payment freeze or reduction, don’t just stop paying what’s due. Online calculators can help you see how much taking a mortgage holiday will set you back over the longer term. However, taking a holiday will work out more expensive than not taking one. Given your mortgage is likely to be a very large sum of money, this may be reasonably negligible, a few hundred pounds, and worth it for the breathing room. How you end up paying for the interest accrued will vary depending on what kind of debt you have – is it a credit card bill, or a mortgage? It will also vary depending on who your loan is with.įor example, with a mortgage, you might find that your monthly repayments rise slightly when you do start repaying your mortgage as normal, or the term of your home loan will be extended, which means you’ll pay more for longer. How payment arrangements work for different productsĪgain, I’ll emphasize that payment arrangements don’t mean that you will have all your interest wiped, though your payments will be either reduced or you won’t have to pay anything while you have put things on ice. This is the case even if you didn’t need to enter a payment arrangement in the spring. If this is you, and you are concerned about how to pay your bills, you can now ask for a payment arrangement on most borrowing products for up to three months from the point at which you ask, until 31st October. Sadly, there are going to be many people facing redundancy and uncertainty following the end of the furlough scheme. If you have not taken a payment arrangement yet, but you are now in financial difficulty The quicker you clear an outstanding balance or interest, the less it will cost you. Interest on loans that you’ve put on pause is not automatically wiped, which means you’ll probably have to find a way to meet what could be higher bills. This is a smart move if you can afford it. If lockdown has given you breathing space to save more than expected, you might decide to both restart your payments and immediately make up any that you have missed. Most lenders have several options open to you, which might include a reduced payment plan or payment freeze, but these will vary by lender so ask what they can do. It has a budget tracker at to help you understand your incomings and outgoings in detail and an online form to report your circumstances. Zopa, for example, is getting in touch with customers before their payment arrangement ends to agree together what happens next. Many have set up dedicated phone lines or online forms. Most lenders will contact you when you are near the end of your current arrangement, but if this doesn’t happen, it’s best to approach them to discuss your next steps. If you don’t feel able to return to full payments, agreeing to new reduced payments will at least enable you to clear some of the balance, meaning arrears won’t mount as fast. And, if you can now afford to start repaying towards your debt, it’s best to do so. But some workers who took a payment holiday in March are now heading back to work, or reaching the end of furlough, so may find that they are in a better position to restart payments. If you are already on a payment arrangement and your situation has changedĪt the beginning of the pandemic it was unclear how our finances would be impacted, and for many it still is. Here’s what you need to know to weigh up the benefits and longer-term effects of payment holidays. This was introduced in March as a way to help us all through unexpectedly straitened times and is currently running until the end of October.īut just because we can, should we automatically choose to take a break from our financial commitments? Could it prove an expensive decision in the long run? Or is it best to take a break where it’s given? The government announced that people affected by Coronavirus have the opportunity to pause or reduce payments on their mortgages, personal loans, credit cards car finance or bank overdrafts. The offer of a holiday from repaying your bills for a few months sounds great, right? Not least at a time when extra cash in the savings pot could help cushion you against a dreaded second wave of Coronavirus and further lockdowns. Our real money correspondent, Laura Whateley explains what you should consider when taking on or extending a payment arrangement
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