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Worried about payment holidays ending?

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Payment holiday for debt repayments

Payment holidays ending? Find out what to do

If you’ve been depending on payment holidays for your mortgage or credit card, you’re probably worried about what will happen when they end. There are a few things you can do, including talking to your creditors about what you can and can’t afford to pay.

Not being able to resume payments after a break may be a sign you need debt advice.

The coronavirus pandemic has caused great disruption to many people’s financial situations.

A large number of us have been making use of payment holidays from our creditors to help get us through this difficult period. But many of these payment holiday schemes will soon be coming to an end. What will happen next? Find out what you should you do if you still need help.

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What happens at the end of a payment holiday?

If you’re coming to the end of a payment holiday, your creditor should get in touch with you to discuss your options, and what you can do next. If you’re still in financial difficulty, it’s very important you talk to your creditor and discuss these options with them.

If you don’t contact your creditors, they may simply restart your repayments.

Bear in mind that it’s in your creditor’s interests to help you if they possibly can, so don’t worry about discussing your situation with them. Have your budget ready so that you can explain to them clearly how much you can afford to repay.

account relationship iconIf you contact us for debt advice, we will work out your monthly budget with you during your advice session.

When you speak to your creditors, ask them if they will freeze interest and charges while you deal with your financial situation

The payments you’ve missed during your payment holiday will be added to your outstanding balance, along with any interest.

Depending on your creditor, this may mean that your new repayments are higher than they were before, or your creditor may offer to increase your term if it’s a loan or mortgage. If the term is increased, that would keep the repayments at the same monthly rate, but over a longer period of time.

document iconUse our sample letters to write to your creditors and explain that you’re struggling pay and ask them to consider other options.

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 make up for the missed payments to your mortgage 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 on your credit card

When my payment holiday ends, which debts should I deal with first?

It’s really important to know which debts you should pay first. Your mortgage or rent, for example, is a priority, and you should make sure you can pay this back first.

Council tax and utilities bills are also priorities, because the consequences of not paying these can be serious.

Non-priority debts include your unsecured debts, such as credit cards, personal loans and overdrafts.

I can’t afford to make the repayments after my payment holiday ends. What can I do?

If you’re still struggling with repayments restarting to loans, credit cards or your mortgage, there are a number of options you could consider.

  • Take out a consolidation loan – with a debt consolidation loan you might reduce the amount of interest you have to pay on your debts over the long term. You’ll also only have one creditor to pay back. However, this option has risks, and may not be available to you if you have a poor credit history
  • Equity release – you could look to take some of the equity out of your home to repay your debts. However, this could increase your mortgage payments, and lengthen the time it takes you to repay your mortgage. If you’re aged 55 or over, we can help you with this
  • Get debt advice – getting expert debt advice can help you find an answer to your debt problems. There are a number of possible solutions, and we can help you find the one that’s right for you

Can I get a payment holiday extension?

If you’re still experiencing financial difficulties as a result of coronavirus, you may still be able to apply for another extension of your payment holiday. This will depend on the individual creditor, and your individual circumstances.

If you’ve already taken a payment holiday, in some instances this can be extended. However, you should start repayments again if you can afford to, as you’ll pay off your debt quicker, and you’re likely to have to pay less in interest.

Have you heard about our Covid Payment Plan (CVPP)? This is a short-term helping hand for people whose finances have been affected by coronavirus.

Will extending my payment holiday affect my credit file?

Covid payment holidays aren’t reported to credit files, but if lenders know you’ve had a payment holiday this may affect future lending decisions

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Can I increase the term of my loan or mortgage?

If you’re worried about your payments increasing when your payment holiday ends, one option might be to increase the term of your loan or mortgage. This will depend on your creditor being willing to do this.

The advantage is that your repayments will be similar to what they were before. The disadvantage is that you’re likely to pay more in interest overall.

Other options for when payment holidays end

Make a budget

If your payment holidays are ending, it’s really important to make sure your budget is up to date. That way, you’ll know what you need to do to make sure you can afford your repayments.

The first step is to talk to your creditors and come to an agreement about what they’re willing to do to help you. Once you know what your new payments will be, and for how long, you’ll be able to take a fresh look at your budget.

We can help you revise your budget, or follow our budgeting guide to put together a new one.

household bills iconWhen putting together your budget, remember to include the interest you’ll have to pay back on your missed payments.

Look at where you can save money

If you’re worried about your loan, credit card or mortgage payments restarting, it’s a good idea to look at where you can save money. Doing this might help you to afford your repayments more easily.

I’ve missed a payment. What should I do?

If you’ve missed a payment to a loan, credit card or your mortgage, the first thing to do is get in touch with your creditor. They’ll be able to tell you what your options are for getting your payments back up to date.

If you’re worried about your payment holidays ending, and you think you may be in financial difficulty as a result, we offer free and impartial debt advice online and over the phone.