If you’re struggling to keep up with your consumer credit repayments because of coronavirus, or you’re coming to the end of a payment holiday 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:
- tailored 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)
- where to find help managing money and debt
- vulnerable consumers
From 1 April 2021, if you're struggling financially as a result of coronavirus, your lender will provide tailored support that will take into account your individual circumstances.
This support will be available if you’re struggling for the first time, or if you’ve already received support, such as a payment holiday, that’s coming to an end (or has ended).
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
Remember, 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 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.
Contacting your lender
Don’t wait until you miss a payment, 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 may need to collect information on your circumstances and 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.
It’s important to be open and honest about your financial situation with your lender, so you can agree an option that's right for you.
Until 31 March 2021, you can apply for a payment holiday under the Payment Deferral Guidance.
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
If you haven’t taken a payment holiday, or you’ve taken payment holidays of less than 6 months, you have until 31 March 2021 to apply for another payment holiday under the Payment Deferral Guidance.
All payment holidays taken under that guidance must end by 31 July 2021.
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. Tailored support could include a payment holiday, if it's appropriate to your circumstances.
Remember, carefully consider if you need a payment holiday – and make payments if you can.
Who is eligible for a payment holiday
You may be entitled to apply for a payment holiday 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 3 months at a time. They can also only agree to give you a payment holiday 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 doesn’t exceed 6-months.
A firm may also decide that a payment holiday isn’t in your best interests. If that is the case, they should instead offer support tailored to your individual circumstances.
Please note, you won’t be eligible for a payment holiday under the Payment Deferral Guidance if you’re in arrears that aren't related to coronavirus. If you’re already receiving tailored support, you should continue to receive this. This may also include allowing you to temporarily defer payments, if that is appropriate to your 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 this period to give you time to recover your financial position.
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) before 31 March 2021. If you’ve already had a payment holiday, you should ask your lenders for tailored support.
Firms shouldn’t report payment holidays, agreed under our Payment Deferral Guidance, as missed payments on your credit file. This should help to minimise the impact on your future credit prospects if you’re 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 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.
From 31 January 2021, firms can repossess goods and vehicles. But this should only be done as a last resort. Any repossession action will also have to follow relevant Government public health guidelines and regulations, for example on social distancing and shielding.
We expect firms to exercise particular care when dealing with vulnerable customers. They should carefully consider the potential impact on these customers when deciding whether to repossess goods or vehicles.
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.