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. Read more about:

Remember, do not cancel or reduce payments until you’ve contacted your lender. If you’ve already received support and can afford to start making repayments, it is in your interests to do so, as you may have to pay back more later.

The measures sit alongside steps taken by the Government to support mortgage holders, renters, furloughed employees and the self-employed. Find out more about the support available for mortgage holders.

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.

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.

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

Be as open and transparent as possible with your lender, 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 product and you’re facing temporary payment difficulties due to coronavirus, you have until 31 October 2020 to apply for a payment freeze. 

Personal loans also include guarantor loans, logbook loans and home collected credit.

Payment freezes

  • A payment freeze is a period of time, agreed with your lender, where you do not have to make any payments.
  • A partial payment freeze is period of time, agreed with your lender, where you can make reduced payments. 

Remember, a payment freeze is temporary and you will still have to pay back the full amount later. 

If you can afford to keep up repayments, either in full or a reduced smaller sum, then it is in your interests to do so. Interest will continue to build during the payment freeze and you will need to pay back more later. 

For example, if you agree a payment holiday for 3 months with your lender this means that after 4 months you will owe a larger amount – the amount not paid over 3 months plus any interest charged plus your standard monthly repayment

What this means for you

If you are having difficulty making payments because of coronavirus, you may be able to make no (or small) payments for a period of 3 months. 

If you have already taken a payment freeze and are still facing temporary payment difficulties due to coronavirus, you are able to request another payment freeze for another 3 months.

Payment freezes and your credit file

Under our guidance, firms should not report a worsening status to credit files if you take a payment freeze.

This should help make sure that there is no long-term negative impact on your credit file if you are able to get back on track at the end of a payment freeze.

However, this does not mean that your credit score will not change over this period, as these are influenced by a wide range of factors.

You should also 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 take into account your bank account information, or consider your use of credit products or how much you are in debt, when making a lending decision.

Your lender should provide you with general information about the potential impact of a payment freeze on any future lending decisions. 

It is also important to remember that the protection to your credit file will not continue indefinitely. If your payment freeze comes to an end, and you do not make a payment under the terms agreed with your lender, it is likely that your credit file will be negatively affected.

What happens when your payment freeze ends

If you previously took a payment freeze, your lender will get in touch with you about what happens when your payment freeze ends. 

If you can start to make repayments, in full or in part, then it is 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 cannot afford to start making repayments, then you must let your lender know. More support is available and firms will consider what is in your interests and may grant you a second full or partial 3-month payment freeze or another option.

Cancelling your credit card, store card or catalogue credit

Lenders are not prevented from cancelling your credit card, store card or catalogue credit. However, if you depend on these credit products for meeting essential living expenses, such as paying your mortgage, rent, council tax, food and utility bills or for buying essential items such as school uniform or baby essentials, then you should let your lender know. 

Overdrafts

If you have an arranged overdraft

You can ask your main current account provider for up to £500 of overdraft borrowing with no interest for 3 months. You can also ask for help with the costs of your overdraft above this amount if you need it.  

Some providers may provide the interest free overdraft facilities automatically to all their arranged overdraft customers without a need to request it, while others may require customers to request it. 

To find out what your bank or building society is doing, and whether you need to act to benefit from this support, check their website.

You can request this support until 31 October 2020. If you have already received this support for 3 months, you can request it for another 3 months.

If your current arranged overdraft is below £500

Once your interest free amount is in place, 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. The amount you pay for borrowing over £500 may be about to change. 

If you are experiencing difficulties with your finances due to coronavirus, additional help with the costs above the £500 interest free amount will be available.  

For example, you may be able to access a reduced rate, or additional interest free borrowing. We expect firms to announce how to access this additional support before prices change, so you can access it if you need it.  

If you have a Basic Bank Account

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

Unarranged overdrafts

Sometimes your bank may allow you to go overdrawn even if you don’t have an agreed overdraft, or to borrow more than your agreed limit. This is called an unarranged overdraft.

Last year, we introduced rules limiting how much firms could charge customers who use an unarranged overdraft. Many firms do not charge you for this. Those that do charge, apply an interest rate that is no higher than they charge for arranged borrowing.

You should try not to rely on unarranged borrowing if possible. There is no guarantee your bank will agree to it and you may be eligible for an arranged facility.

Contact your bank to discuss your options.

Other forms of credit

We have introduced measures covering other forms of credit, including:

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

  • if you can afford to make some repayments, even if it is a smaller amount than usual, you should continue to do so
  • 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.

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 at least 1 month up to 31 October 2020. 

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

You can request a payment freeze at any point up to 31 October 2020, but your lender will only be required to grant you a payment freeze on your loan once. 

If you are still facing payment difficulties when the freeze is over, your lender should offer you further support 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.

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 up until 31 October 2020. If you have already taken a payment freeze, and are still in temporary financial difficulty due to coronavirus, you can apply for another 3-month freeze up until 31 October 2020.

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 unless you provide consent for the repossession to go ahead. 

Your provider should explain to you any impacts of suspending the repossession, including on the residual value of the vehicle.   

Rent-to-own

If you are having temporary difficulties meeting payments due to coronavirus, you have until 31 October 2020 to apply for a 3-month freeze on repayments to your rent-to-own agreement. If you have already taken a payment freeze and are still in temporary financial difficulty due to coronavirus, you can apply for another 3-month freeze up until 31 October 2020.

In addition, if you need the goods during this period, and you are facing temporary payment difficulties as a result of coronavirus, 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 have until 31 October 2020 to ask for a 3-month freeze on repayments to your buy-now-pay-later agreements. If you have already taken a payment freeze and are still in temporary financial difficulty due to coronavirus you can apply for another 3-month freeze up until 31 October 2020.

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 have until 31 October 2020 to request a 3-month freeze on your pawnbroking agreement. If you have already taken a payment freeze and are still in temporary financial difficulty due to coronavirus you can apply for another 3-month freeze up until 31 October 2020.

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.

Coming to the end of a payment freeze

If you previously took a payment freeze, your lender will get in touch with you about what happens when your payment freeze ends. 

If you can start to make repayments, in full or in part, then it is 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 cannot afford to start making repayments, then you must let your lender know. More support is available and firms will consider what is in your best interests. 

In the case of motor finance, rent-to-own, buy-now-pay-later and pawnbroking agreements, the firm may grant you a second full or partial 3-month payment freeze or another option. You can apply for another 3-month freeze up until 31 October 2020.

For buy-now pay-later agreements, where the loan is in the promotional period, you can request an additional extension to that period. 

For pawnbroking agreements, where the loan is within the redemption period, you can request an extension to that period or, if the redemption period has already finished, your lender should suspend the sale for the period of the payment deferral.

Longer-term financial difficulties

These measures 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.

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.

Read our information to help you manage money and debt if you have been affected by the coronavirus pandemic.

This information might be helpful to you if you already had payment difficulties and may be in longer-term financial difficulty. Or, if you are 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, visit the Money Advice Service’s Money Navigator Tool.

Vulnerable consumers

Your lender should consider the needs of vulnerable customers when carrying out these measures. Circumstances that could cause you to be considered 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 (eg, your ability to communicate and make transactions online), language and cognitive skills, and low financial capability.

Your lender should be aware that coronavirus and the associated public health measures are likely to worsen personal circumstances that can cause vulnerability.

They may also cause many people, who would not normally think of themselves as vulnerable, to suddenly face personal circumstances that can cause vulnerability.

If you think you could be considered vulnerable, then it is important that you let your lender know this if you are contacting them, so they can consider how best to support you.

Page updates

22/06/2020: Information added in highlight box on the next steps when these measures end.