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Payment holiday for debt repayments

What are payment holidays?

If you’re struggling to keep up with your regular payments, your creditors may agree to a short-term payment holiday. You can ask for credit card payment holidays and breaks in making mortgage payments.

The missed payments during this period will usually be treated as arrears and interest and charges may continue to be added.

You may also be able to apply for breathing space, so your creditors stop calling or writing to you while you deal with your debts.

How do payment holidays work?

You can request a payment holiday, but the creditor doesn’t have to agree to it.

The gap in payments may be marked on your credit file and this may make it harder to get credit in future. Depending how long the break in payments is, your creditor may issue a default notice.

Payment holiday letters

Under the rules of the Consumer Credit Act, lenders are required to send customers warning letters when they miss two payments, even if this break was agreed with the creditor.

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Can I get a credit card payment holiday?

New rules, including payment holidays, were introduced to help people whose finances were affected by coronavirus. However, applications for coronavirus-related payment holidays closed on 31 March 2021.

However, you can approach your creditors to ask for an informal break from payments, to give you some time to deal with your debts. Each creditor will consider your request differently, and may decline. A payment break may affect your credit score.

In Scotland, the Government's ‘moratorium’ period, for people who have debt problems, lasts six months. During this time creditors aren’t able to take action to recover the money owed. If you're considering a moratorium, you don't need to get debt advice from an approved money adviser, but we recommend you do so.

Can I get a mortgage payment holiday?

Mortgage payment holidays are in place for people who are struggling with their repayments. You can apply for one if you've kept up-to-date with your payments.

There are other ways your lender may be able to help you, such as allowing you to reduce payments.

Find out more about dealing with mortgage arrears.

Can I get a break from paying my rent?

You can ask for a payment break, but there's no guarantee the local authority or landlord will agree.

Read our guide to dealing with rent arrears.

How do I ask for a payment holiday?

If you’re considering asking for a payment break, you’ll need to give your bank, local authority or landlord some information to support your request.

They’ll probably want to know about your income, living expenses, any other debts and any change to your financial situation. You do this by creating an income and expenditure form based on your budget.

signpost iconFind out how to complete an income and expenditure form to send to your creditors

You'll need to tell your creditors the reason you're asking for a payment break and when you'll be able to start making normal payments again.

If your creditors agree to a payment break, ask them to send you a letter or email to confirm this.

Payments you should have made will need to be paid after the payment break ends, either by increasing the amount of your future payments, or by adding extra months to the end of the agreement so it takes longer to pay back.

Be prepared that creditors may not agree. If they don’t, contact us and we can look at alternative ways to help you deal with a short-term debt problem. Some creditors will point you towards a free debt advice agency like us anyway if you contact them to ask for a payment break.

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What happens at the end of a payment break?

Interest may still be charged for the period your payments were frozen, leaving you with higher payments to make in the future.

It's very important for your financial situation that you prepare in advance for the end of your payment break, and take into account what will happen to your debts. In most cases: the following will happen:

  • Mortgage - your monthly payment will rise, to take account of the missed payments and extra interest not paid. How much higher your payments will be, depends on how long is left on your mortgage term. Generally, the longer the remaining term, the lower the increase in payments will be
  • Loan - as with a mortgage, your monthly repayment to the loan will rise to cover the missed payments and additional interest charged during the payment break
  • Credit card - your monthly minimum payment will rise, to take account of the extra interest that has not been paid

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