If you’re struggling to keep up your consumer credit repayments because of coronavirus, or you’re coming to the end of a payment deferral and wondering what happens next, find out what your next steps may be.
- talk to your lender if you’re struggling to manage your finances
- if you can afford to make some of your repayments, even if it’s a smaller amount than usual, you should do so
- you shouldn't cancel or reduce payments until you’ve contacted your lender
- if you have general questions for your lender, check their website first to see if the answer is available online
Learn more about:
- support from your lender
- payment holidays for credit products (including personal loans, credit cards, store cards, catalogue credit, motor finance, rent-to-own, buy now pay later and pawnbroking agreements)
- high-cost short-term credit (including payday loans)
- tailored support
- where to find help managing money and debt
- vulnerable consumers
If you’re finding it difficult to pay your personal loan, motor finance or another form of credit, because of coronavirus, your lender should provide you with support. This support will be available if you’re struggling for the first time or if you’ve already had support that’s coming to an end.
Contacting your lender
Contact your lender as soon as possible, if you’re finding it difficult to manage your finances. Contact details should be available on your lender’s website and on their other communications with you.
Lenders have committed to responding as quickly as possible but, due to high levels of demand and staff having to work from home, service levels might be slower than usual.
If you have a general question for your lender, check their website first to see if the answer is available online.
Working with your lender
Before agreeing on any support, your lender should give you enough information so you can make an informed decision. This may include directing you to their website, so you can learn about the different options available.
You may be able to take a partial or full payment holiday for some credit products, if you are eligible. Remember, if you do take a payment holiday, the amount you pay in the longer term is likely to increase.
It’s important to be open and honest about your financial situation with your lender, so you can agree an option that is right for you.
A full payment holiday (also called a freeze or deferral) is a period of time agreed with your lender when you don’t have to make any payments. A partial payment holiday is when your lender lets you make reduced payments for a period of time.
Payment holidays are designed to help you if you you’re finding it hard to make payments, in this case because of coronavirus.
However, it’s important to remember that:
- when your payment holiday ends, you’ll still have to pay back what you owe
- interest will continue to build – unless your lender has told you otherwise – so your repayments may increase after the holiday
- if you take a payment holiday, you will likely end up paying more in the long term
If your financial position improves, you can avoid extra costs by paying what you can.
Applying for a payment holiday
You may be entitled to apply for a payment holiday of up to 6 months in total for the following products:
- personal loans
- credit cards, store cards and catalogue credit
- motor finance, including hire-purchase and leasing agreements
- rent-to-own, buy now pay later and pawnbroking agreements
If you are eligible, lenders can only agree a payment holiday of up to a maximum of 3 months at a time. They can also only agree to give you payment holidays of 6 months in total. This 6-month period includes any payment holiday you may have taken previously. That means lenders can agree to renew your payment holiday after the first 3 months as long as the total length of all your holidays don’t exceed the 6-month limit. A firm may also decide that a payment holiday clearly isn’t in your best interest. They should instead offer tailored support which suits your individual circumstances.
If you’ve had a buy-now pay-later or pawnbroking agreement but don’t currently have to make payments, your lender can agree to extend the time before you do have to make payments to give you time to recover your financial position.
You need to apply for a payment holiday by 31 March 2021 and all payment holidays must end by 31 July 2021.
- If you are newly affected by coronavirus, and you want to benefit from the full 6 months available, you should apply in good time before your February 2021 payment is due. Your payment holiday will then run between February and July.
- If you have had a payment holiday of less than 6 months already, you may be able to apply for another, as long as the agreed length of time doesn’t exceed 6 months in total.
Remember, carefully consider if you need a payment holiday – and make payments if you can.
You won’t be eligible for a further payment holiday if you are in arrears that are unrelated to coronavirus. If firms are already providing tailored support, they should continue to provide this. This may include a payment holiday for an agreed period if that is appropriate to your circumstances. However, there will be different implications for your credit file for this type of payment holiday.
After 31 March 2021, you can apply to extend an existing payment holiday up until 31 July 2021, as long as:
- it doesn’t go over the 6-month payment holiday limit, and
- there are no breaks in the support
You won’t be eligible to apply if you’ve already had payment holidays of 6 months overall. Instead, you should ask for tailored support from your lender.
If you are newly affected by coronavirus, you are entitled to apply for a payment holiday of 1 month on your high-cost short-term credit agreement (such as payday loans). If you have already had a payment holiday, you should ask your lenders for tailored support.
Firms shouldn’t report payment holidays, agreed under our guidance, as missed payments on your credit file. This should help to minimise the impact on your future credit prospects where you are able to get back on track at the end of a payment holiday.
However, you should remember that credit files aren’t the only source of information that lenders can use in lending decisions.
Factors other than payment history may also be relevant. For example, lenders may consider your bank account information, your use of credit products, or how much you are in debt, when making a lending decision.
If, after taking payment holidays of 6 months, your lender agrees that you can continue to temporarily defer payments, this may be reported to your credit file in accordance with normal reporting processes.
If your lender agrees to provide you with more support, they should tell you what this will mean for you and your credit file.
Coming to the end of a payment holiday
Your lender will contact you about what will happen when your payment holiday ends.
If you continue to face difficulties because of coronavirus, your lender should provide you with tailored support.
If you can start to make repayments, it’s in your best interests to do so. Your lender will work with you to find the best way of catching up on missed payments.
If you’re not eligible for or do not want a payment holiday, your lender will provide tailored support that will take into account your individual circumstances. This will give you time to get back on track.
Your lender should:
- work with you to provide support before you miss payments
- be flexible and use a range of short and longer-term options to support you – this could include a period of no payments or reduced payments
- give you time to repay what you owe and not pressurise you into repaying your debt within an unreasonably short period of time
- direct you to debt help or money guidance, and allow you to access debt advice before deciding on the support you take
- where appropriate, put in place a sustainable repayment plan that is affordable and considers your wider financial situation (including other debts and essential living expenses)
- prevent your debts from escalating (once a repayment plan is in place) by suspending, reducing, waiving or cancelling any interest, fees or charges to make that happen
Your options will depend on your circumstances. When assessing what options are best for you (including the amount you can afford to repay) your lender will consider your essential living expenses, which could include:
- mortgage payments, rent and council tax
- reasonable food, clothing, health care and travel costs
- other costs, where non-payment could result in the loss of your home or essential goods or services
If you need tailored support from your lender, either at the end of a payment holiday or for the first time, this may be reflected on your credit file in line with normal reporting processes.
This will help make sure lenders have an accurate picture of your financial circumstances and reduce the risk of unaffordable lending.
Your lender should be clear about what this support could mean for your credit file.
If you’re having trouble with your finances because of coronavirus, speak to your lender about what support is available.
Support is available whether you need help for the first time, or if you’ve already had support with the cost of your borrowing. This support may include:
- reducing or waiving interest
- agreeing a plan of staged reductions in your overdraft limit and your balance
- supporting you to reduce your overdraft use by transferring the debt to an alternative credit product on more favourable terms
You should be as open and honest as possible about your situation when talking to your bank or lender. This will help them to give you the option that best meet your needs.
Firms are allowed to start or restart required court proceedings, provided they follow our guidance and relevant regulatory and legal obligations. Firms should not start repossession action until all other reasonable attempts to resolve the situation have failed.
Your lender should keep you fully informed and discuss the potential consequences of suspending any steps towards repossession, including on the value of your goods or vehicle.
Find out more about managing money and debt if you've been affected by the coronavirus pandemic.
This information might also be helpful to you if you were struggling to make payments before the pandemic, if you’re in longer-term financial difficulty, or if you’re worried about how you will manage your payments and debts in the future.
For more information on managing your money during and after the coronavirus pandemic, you can also use the Money Advice Service’s Money Navigator Tool.
Lenders should consider the needs of customers who may be vulnerable.
Circumstances that may cause you to become vulnerable include:
- poor health (physical or mental)
- low financial or emotional resilience
- life events such as bereavement or divorce
- low capability, including poor digital skills (such as your ability to communicate and make transactions online), language and cognitive skills, and low financial capability
Coronavirus, and the measures introduced to help manage the pandemic, such as local restrictions, may affect personal circumstances in ways that could cause vulnerability.
Lenders should be aware that an individual’s circumstances could change quickly in a way that could make them vulnerable.
If you think you’re in circumstances that mean you’re vulnerable, it’s important to let your lender know when you contact them, so they can work out how best to support you.
22/06/2020: Information added in highlight box on the next steps when these measures end.