Credit Payment Holidays Extended for Millions
09th November 2020
Things move fast in a pandemic, so it pays to stay on your toes. Right now, it’s looking like millions of UK households financially hit by COVID-19 could have a little more breathing space in many of their credit card and loan repayments.
According to an announcement from the Financial Conduct Authority (FCA), people struggling to make certain types of payments will be able to “defer” them for up to 6 months. That means some valuable time’s been bought for those with credit cards, personal loans, car finance and even pawned possessions. In the meantime, people who’ve been driven into the arms of short-term “pay-day lenders” will be able to take a 1-month holiday on repayment.
With another lockdown underway this week, this announcement could be pretty welcome news for a lot of families staggering under the weight of their various repayments. Obviously, it’s not the first time this has happened. Payment holidays started hitting the headlines back in April, before being extended in July for another 3 months. Now that coronavirus restrictions will be shutting many businesses’ doors again, people already struggling will be feeling the financial strain in the run-up to what could be an unusual and uncomfortable Christmas.
The extended payment holidays also apply to people with rent-to-own and buy-now-pay-later arrangements. On top of that, people who’ve already taken a payment deferral will be able to make another one. What we’re not so sure about right now is whether the previous rule about ditching the interest on the first £500 of overdrafts still applies. The FCA says it’s working with lenders and trade bodies to get the scheme rolling as quickly as possible, and will make a full statement later.
As always, though, there’s a note of caution in all of this. We’ve banged this drum before at RIFT, and we’re only going to get louder as the pandemic chaos grinds on. Taking a payment holiday can give you some crucial slack in your finances at a time when you spending power’s getting squeezed hard. Even so, it’s so important to keep in mind that putting the problem off for a bit won’t stop it tripping you up later. Debts never get more manageable when you ignore them – and in most cases they end up getting worse. Taking up payment holidays is the smart move to make if you’re in serious trouble paying off what you owe. If you can still manage to make your agreed repayments, though, that’s always going to be your better option.
Also, remember that the kind of one-size-fits-all approach we’re seeing here might not be the best fit for your circumstances. Many lenders are offering more personalised support through the crisis. In fact, they’re supposed to take active care of borrowers in trouble, to make sure they always have the support they need. It’s defintely worth checking out your options before simply punting all your debts into a big lump down the road.
We’ll be keeping a close eye on this situation, so check back soon for more details. Meanwhile, always remember that the first step toward avoiding debt trouble is making sure you get back what the taxman owes you. Talk to RIFT about claiming your tax refund.