Payment Holiday Ending? What To Do If You Still Need Help

When cases of Coronavirus started to rise what feels like a lifetime ago, payment holidays on mortgages, loans, credit cards, and other types of borrowing were one of the first things that were introduced as a help measure. They were designed to give those who were struggling, whether because they’d been furloughed, made redundant, or otherwise left out of work – and wages – because of the pandemic, the chance to get back on their feet and adjust to our new normal. However, now, the payment holiday scheme is coming to an end.

While being able to get a temporary payment holiday from their borrowing has provided many with the breather they needed, and they’re now able to start making payments again, there are others who are still struggling financially because of the pandemic, and some who weren’t struggling initially, but now are. If you’re one of these people and you’re not sure what to do, read on to find out more about your options.

Can I still get a payment holiday if I haven’t had one?

The last day you can apply for a payment holiday from your lenders is 31^st October 2020. So, if you haven’t had a payment holiday yet for any reason but think you need one now, then you still have a little bit of time to apply for one.

If your lenders approve your request for a payment holiday, then this will last for three months, meaning your payments re-start again in January or February. You won’t be able to request another payment holiday if you still need one then.

But, if you’re able to continue making your payments, we don’t recommend requesting a payment holiday simply because they’re available. With the exception of high cost, short-term or payday loans, lenders can still charge you interest while you’re on a payment holiday, meaning you’ll end up paying back more overall.

What happens when my payment holiday ends?

Before your payment holiday ends, your lender should have been in touch with you to make sure you’re now able to afford your payments and let you know about your options for making up the payments you missed during your payment holiday, and in the event that you can’t re-start your payments as normal yet.

If you don’t let your lender know that you’re not able to restart your payments, then they may resume automatically, so if you’re not going to be able to afford to start up your payments again, then it’s important you take action now, to make sure you won’t be left short for essentials if a payment is taken from you.

If you are able to start making payments again, then you may find that once they start up again, they’re higher than they were before your payment holiday. This is because your balance will now include the payments you didn’t make because of your payment holiday, as well as any interest that you were charged during that time. So, it’s important that you check with your lender what your payments will be when they restart, and work out whether or not you can afford to start paying again based on those numbers, not the old ones.

Can I get another payment holiday?

If you can afford to start making your payments again, then we recommend that you do it, as this will keep the amount of interest you pay on your borrowing to a minimum. If you can afford to pay something towards your borrowing, but not the full amount, then speak to your lenders about this – they will more than likely be happy to arrange it for you, but you’ll need to ask.

If you can’t afford to pay anything towards your borrowing, then you can apply for another payment holiday with your lenders until 31^st October 2020. If your lenders agree to give you another payment holiday, then this will last for three months from the date it was agreed, and will likely mean your payments restart in January or February 2021.

Talk to your lenders

If you’re still struggling financially and can’t re-start your payments once your payment holiday comes to an end, then it’s important you speak to your lenders as soon as you can. We know this is probably not a conversation you’ll be looking forward to, but unless you talk to your lenders, they won’t know that you need help.

Lenders have all sorts of different ways to support you if you’re struggling financially, and help you pay back what you owe in an affordable way. They might be able to help you with:

• Another payment freeze outside of the payment holiday scheme – if this is offered to you, it might be shorter or have different rules to the payment holiday scheme, so make sure you’ve checked all the details before you agree
• Freezing interest and charges like late fees, default fees, or admin fees that could be added to your balance if you’re not able to re-start your payments
• Arranging a reduced payment plan where you agree with your lenders to pay them less every month, so that you’re still chipping away at your balance affordably

If you’re considering any of these options, then it’s important to also ask your lender about the impact to your credit score. Payment holidays were set up so that they wouldn’t have a negative effect on your credit score. But, other things that lenders can do to help may have an impact. Your score going down may be something you can’t avoid right now, and that’s OK. There are always ways to rebuild your credit score later. But, knowing where you stand means that you won’t get any nasty surprises later.

Get advice on your situation

Payment holidays have been brilliant for people who were managing well financially before the pandemic threw a spanner in the works, and only needed temporary help. But, for people who were already struggling to make ends meet, pandemic or no pandemic, and perhaps had already fallen behind on one or more of their bills, payment holidays might not always be the best choice. Sure, they give you a bit of extra time to figure things out, but they’re not a long-term solution to a debt you’re not able to repay.

That’s where speaking to a qualified debt advisor can help. Debt advisors can help you take stock of your situation, deal with your creditors on your behalf, and work with you to make a plan, or find a formal debt solution that’ll help you clear your debts once and for all. At CredAbility, we’ve partnered with the Debt Advisory Centre to help people who need assistance get the advice they need. Initial advice given by the Debt Advisory Centre is free, but it’s important to bear in mind that ongoing fees may be payable if you decide to enter into a debt solution with them.