Coronavirus: information for consumers on personal loans, credit cards, overdrafts, motor finance and other forms of credit

Find out about the measures introduced to support you if you are experiencing a change in financial circumstances due to coronavirus (Covid-19).

If you’re facing short-term cash flow problems because of coronavirus, there are several new measures that have been introduced to help, including to:

The new measures will sit alongside steps taken by the Government to support mortgage holders, renters, furloughed employees and the self-employed.

In the current emergency, you should only contact your lender if you really need to. If you do contact them, try to do so online as you may face delays if you call, due to the higher number of callers. Please only visit branches if you don’t have an alternative.

 

Consider whether these options are right for you

While these measures are designed to help you during this difficult time, they may result in increased costs in the longer term. So:

  • think carefully before entering into one of these arrangements
  • only do so if you need immediate and temporary financial assistance
  • if you can afford to make some repayments, even if it is a smaller amount than usual, you should continue to do so

Remember, do not cancel or reduce payments until you’ve contacted your lender. Be as open and transparent as possible with them so that they can offer you the most appropriate support.

Personal loans and credit cards

If you have a personal loan, credit card, store card or catalogue credit, you can ask for a freeze on repayments for 3 months. Personal loans also include guarantor loans, logbook loans and home collected credit.

What this means for you

You may be able to make no (or small token) payments for 3 months. 

This won’t affect your credit file for the period of the payment freeze. However, interest will continue to build during this period, meaning you pay higher costs in the longer term. 

If you can afford to keep up repayments, either in full or a smaller sum, then you should do so.

Your lender may offer you alternative temporary relief - for example, where a high rate of interest would build during the payment freeze period leading to longer-term financial difficulty.

When this applies

You will be able to request help under these measures for a period of 3 months – you will then be able to benefit from them for a period of 3 months from when you agree them with your lender.

Overdrafts

If you have an arranged overdraft

You can ask the provider of your main current account for up to £500 of overdraft borrowing with no interest for 3 months.  Some providers have already announced they will provide interest-free overdraft facilities. To find out what your bank or building society is doing check their website.

If your current arranged overdraft is below £500

You will not pay any interest on the amount of your current overdraft limit. 

You could also ask your provider to increase your overdraft limit to £500, subject to checks on affordability. 

If you don’t have an overdraft

You can request a new overdraft. This will be subject to normal checks on affordability. 

If your current arranged overdraft limit is more than £500

Firms are only required to provide up to £500 interest free. 

When this applies

You will be able to request help for a period of 3 months. This 3-month period will start from the date you agree with your lender.

If you have a Basic Bank Account

This measure applies to personal current accounts, but not Basic Bank Accounts (that legally can’t have overdrafts), so contact your provider about what’s possible for you.

New overdraft rules

We previously announced new rules meaning that firms can only charge a single annual interest rate for arranged and unarranged overdrafts, with no additional daily charges.

These new rules came into force on 6 April. However, over the next 3 months, firms will have to ensure that all consumers are not paying more than they would have paid compared to the prices charged before the changes came into force.

Other forms of credit

We have proposed new measures covering other forms of credit including:

We confirmed these measures on 24 April 2020 and they will apply from Monday 27 April 2020.

They will be available to you if you are having temporary difficulty making payments because of coronavirus. However, it’s important to remember that:

  • the proposals do not prevent lenders from continuing to charge interest during a payment freeze
  • the only exception to this is high-cost short-term credit, including payday loans (where additional interest should not be charged)
  • you may end up with more to pay at the end of a payment freeze
  • under some of these proposals, your lender won’t have to give you a payment freeze if it isn’t in your interests
  • you should not cancel or reduce payments until you’ve contacted your lender

Nothing we are proposing here prevents lenders from offering you more support.

Motor finance

If you are having temporary difficulties meeting finance or leasing payments due to coronavirus, you can apply for a 3-month payment freeze.

Firms should not alter aspects of your Personal Contract Purchase (PCP) or Personal Contract Hire (PCH) agreement in a way that is unfair. For example, firms should not recalculate the value of your car based on a temporary decrease in used car values (due to coronavirus) in order to charge you more each month through your ongoing repayments.

If you want to keep your vehicle at the end of your PCP agreement, but you do not have the cash to cover the outstanding balance due to coronavirus-related temporary financial difficulties, firms should work with you to find a solution.

Additionally, if you are experiencing temporary payment difficulties due to coronavirus and need the vehicle, your motor finance provider should not take steps to end the agreement or try to repossess the vehicle.

High-cost short-term credit (including payday loans)

If you are having temporary difficulties meeting payments due to coronavirus, you can request a freeze of payments on your high-cost short-term credit loan for 1 month. The 1-month timeframe reflects the shorter length period of these types of agreement compared to other forms of credit.

High-cost short-term loans usually charge high interest rates. Under our proposals, the lender will not charge you the additional interest that would otherwise build up over the 1-month repayment freeze. You will still have to resume your payments in full following the 1-month freeze and you will still owe the outstanding balance.

If you are still facing payment difficulties once the freeze is over the lender should offer you forbearance in line with our rules. This may involve allowing you to make up your repayments in an affordable way – whether for example, by one single payment at the end of the term, or by a number of smaller payments.

If you think your finances won’t be back on track after a month, you should speak to your lender about other options – including an affordable repayment plan.

Rent-to-own

If you are having temporary difficulties meeting payments due to coronavirus, you can apply for a freeze on repayments to your rent-to-own agreement for 3 months. In addition, if you need the goods during this period, they will not be repossessed.

What’s more, where social distancing means rent-to-own firms are unable to collect or repossess your goods, they should not charge you extra for this unavoidable extension of your agreement.

Buy-now pay-later

If you are facing temporary payment difficulties because of coronavirus, you can ask for a freeze on repayments to your buy-now-pay-later agreements for 3 months.

If you have a buy-now-pay-later agreement and you are within a promotional period, your lender should extend the promotional period by the length of the freeze period.

During a promotional period, you do not have to make repayments each month but will be charged interest on any balance you have not paid back by the end of that period.

Pawnbroking

If you are having temporary difficulties meeting payments due to coronavirus, you can request a freeze on payments on your pawnbroking agreement for 3 months.

This will involve the redemption date being extended for this period. If the date has already passed, an item you have pawned should not be sold for that period.

If notice of intention to sell has been given to you already, the firm should suspend the sale for the period of the payment freeze.

If you’re already having difficulties

These changes are intended to provide help for short-term cash flow problems. If you have longer-term problems or are in other financial difficulty, other options may be more appropriate.

Firms must help you if you’re having financial difficulties.

If you’re struggling to make your loan payments, firms should consider:

  • suspending, reducing, waiving or cancelling any further interest or charges
  • deferring payment of arrears
  • accepting smaller payments for a reasonable period of time 

Make sure you contact your lender about what options are best for you.

The Money Advice Service provides guidance on how to prioritise your debts alongside further information on managing your money

When contacting your lender

Try and contact your lender online if possible. Call centres are very busy during the pandemic. If you need to use the telephone, please be patient.

We know this is a stressful time for everyone. So when you speak to an operator or someone in a branch please try to stay calm and remember that they are working extremely hard and doing their best to help people through the current situation.

What to expect when these measures come to an end

Ahead of these measures coming to an end, we expect firms to contact you to set out next steps. You should let your lender know if you expect to continue to face payment difficulties as a result of coronavirus. Your provider should consider ways to help you if you are still struggling such as providing further forbearance.

Forbearance normally means arranging other ways to pay your debts, which could possibly include debt forgiveness. However, it’s important to know that this may impact your credit score and your ability to borrow.