31st March 2021 is the deadline for applying for loan or credit card payment holiday if you’re struggling to make your repayments due to the impact of coronavirus.
- If you’ve not already applied for a loan or credit card payment holiday, you’ll usually be given a three month payment holiday, although you can resume payments earlier.
- If you are already on a payment holiday, you may be able to top-up for an additional three months (total of six months).
- All coronavirus related payment holidays will need to end by 31st July 2021.
If you’re eligible for a loan or credit card payment holiday, you’ll still be charged interest during this time. Read on for more information and to make sure it is the right decision for you.
Last week, the Financial Conduct Authority (FCA) announced new measures to protect credit users from the impact of COVID-19. To help you get a better understanding of what this means for your loan and credit card payments, here’s a quick run through of how you can take advantage of these new measures when they come into effect.
Freezing your loan payments
The new measures will allow borrowers who have been impacted financially by COVID-19 to temporarily freeze their loan and credit card payments for up to 3 months. Due to the significant impact of the pandemic on borrowers’ personal finances, the FCA is hoping to implement their plans by 9th April 2020.
Who can apply for a loan payment freeze?
To be eligible for a loan payment freeze, your finances need to have been directly impacted as a result of COVID-19. Customers who reasonably expect to be impacted will also be able to apply.
For example, if you have recently experienced a reduction in household income due to the effects of COVID-19, you will be eligible. However, if you were already in financial difficulty prior to this, the normal forbearance rules will apply.
If you apply for a payment freeze, it’s likely your lender will make enquires to work out if you will benefit.
Will my loan still build up interest during the payment freeze?
Yes, lenders can still charge you interest during a 3 month freeze or ‘payment deferral’. If you apply, your lender will let you know how the freeze will affect your future loan payments.
You may need to cover the cost of the delayed payments in your existing loan term. This means that your monthly payments would increase at the end of the payment freeze.
Will freezing my loan payments affect my credit score?
The FCA has proposed that your credit score should not be affected by using these measures.
How do I apply for a loan payment freeze?
You’ll only be able to apply once these measures come into effect. The proposed date for this is 9th April 2020. Once this happens, you’ll need to contact your lender directly.
Here at Freedom Finance, we’re a credit broker, not a lender.
What other options do I have?
If you need to reduce your monthly outgoings but don’t think a payment freeze is right for you, you could consolidate your debts to make your monthly payments more manageable. By using a loan with a longer term to pay off existing debts, you can spread the cost over a longer period and reduce how much you need to pay each month.
You may also be eligible to switch to a loan with a lower APR than your current credit products. If so, you may find you can save money each month by paying off your existing debts with a cheaper loan.
If you are thinking of consolidating existing borrowing you should be aware that you may be extending the term of the debt and increasing the total amount you repay.
To check your debt consolidation loan offers, just fill in a few details and we’ll do the rest.