Payment Holidays Extended for Borrowers Hit by COVID-19
06th July 2020
People paying off credit cards, store cards and even personal loans will be able to apply for an extension as of the 3rd of July. The same goes for the £500 interest-free overdraft scheme. Anyone who’s been newly hit by the pandemic’s effects will qualify for a 3-month payment holiday. Again, you don’t have to have caught the virus yourself to qualify. The extensions are designed to help anyone whose money situation’s been damaged through redundancy, reduced income and so on.
The COVID-19 pandemic has affected the whole of the UK. It’s hit our health, our finances and even the ways we relate to one another. Millions of us are fighting to keep our debts under control while facing job losses, redundancies and collapsing businesses.
One of the major moves to lighten the financial load of people getting financially squeezed by the lockdown was the collection of payment holidays set up for loans, credit cards and overdrafts. As of April 2020, the Financial Conduct Authority (FCA) told borrowers they could get a freeze of up to 3 months on loan and credit card payments. Those with arranged overdrafts of up to £500 could have them set to 0% interest for 3 months as well.
Debt repayments are a huge problem for many people, and they’re hitting our mental health almost as hard as our finances. The payment holidays were originally set to end in July. However, with the virus still causing havoc, these schemes have now been extended for another 3 months, up until the 31st of October for anyone newly affected by COVID-19’s rampage. While it won’t kill off money worries for everyone overnight, this extension will at least offer some vital breathing space for millions of people while the UK staggers back to its feet.
So far, well over a million people have taken up one or more payment holidays, easing the pressure on households all over the UK. However, it’s worth keeping in mind that a freeze on payments doesn’t mean your debts magically disappear. As FCA chief executive Christopher Woolard puts it:
"For those who are now in a position to restart payments, it will be in their best interests to do so. But for those who still need it, the package we are confirming today ensures there is help and further support."
As before, not every kind of borrower will be able to take advantage of the new rules. Motor finance, for example, isn’t included in the extension scheme. The same goes for things like pawnbroking and “buy now, pay later” arrangements. That said, we’re expecting some new announcements about those fairly shortly.
According to the FCA, lenders will be contacting their borrowers to talk them through their options. If it turns out that you still need and qualify for an extension past the original July end date, you’ll be able to get one set up.
Depending on your situation, actually freezing your payments altogether may not be your best move. In fact, you could just be piling up more trouble for yourself later on. Other options might include changing your plan to bring down your repayments to a more manageable level for those 3 months instead.
If you’re having serious money trouble and can’t stick within the protected £500 limit of your interest-free overdraft, banks have said they’ll be lowering the cost of going over it. However you choose to go forward, a little extra good news is that your credit rating won’t be affected.
If you're a RIFT customer and you've not claimed your tax refund for this year, or if you've never claimed before and want to find out if you're due a refund, give us a call and we can get you back what's yours and help to ease the pressure.