Guides

Payday Loans And Car Finance Customers Get 1 Month Payment Holiday Due To Coronavirus

New Car

UK lenders are now required to offer payment holidays to borrowers affected by coronavirus, as per a new rule imposed by the Financial Conduct Authority (FCA) on the 27th April.

The coronavirus pandemic has changed much of the way we live, raising concerns not only with our health, but also our financial stability. Earlier this month figures showed that 2 million Brits had lost their jobs due to the effects of COVID-19, with businesses from all different industries having to make drastic cuts as lockdown measures persist.

As many continue to financially struggle amidst these difficult times, UK lenders have started to offer payment holidays on a range of different loan types.

Row of terrace houses

On the 17th March, banks agreed to offer forbearance on mortgages, helping struggling borrowers by providing a three-month mortgage holiday. During this time, borrowers will not have to make payments on their mortgage for three months.

Whilst many banks have started to offer this, it’s important to note that offering forbearance on mortgages during this time is voluntary, meaning banks are not obliged to offer them and a small admin fee may apply.

Small Business Owner Going Through Finances

Alongside this, the government recently begun offering the Business Interruption Loan Scheme, helping businesses of all different sizes that have been affected by COVID-19.

The FCA has also announced new regulations to help those with loans and credit cards, announcing earlier this week that lenders must offer payment holidays to those financially struggling due to COVID-19.

Borrowers with personal loans and credit cards are allowed to ask for a “freeze” on their repayments. This repayment-free period lasts for 3 months, and will not have an impact on the borrower’s credit file. Interest, however, will still be applied during this period, meaning borrowers will end up paying more in the long run.

Additionally, you can also ask your main current account provider for an interest-free, £500 overdraft. This interest-free period should last for 3 months, starting on a date organised and agreed upon by you and your lender.

Silver car parked on driveway

The FCA are also requiring payday lenders and car finance companies (including motorhome finance) to offer payment holidays for struggling borrowers. Those borrowing a payday loan can now request a payment holiday of one month, with no interest applied during that month. Lenders may choose to offer longer holiday periods; however, they are not required to do so.

Borrowers struggling with their payday loan repayments can apply for a 1-month payment holiday up until the 27th July. Once this holiday period is over, lenders will have to help borrowers manage their deferred payments, making sure this is executed in an affordable way.

It’s important to note that these rules regarding payment holidays for payday loans came into effect on the 27th April. If you did not receive help from your lender when asking before this period, it’s worth contacting them again, as now they are required to help those who are struggling amidst the current pandemic.

Related posts
Business

'Bounce Back' Loans Of Up To 50k Now Available For Uk Small Businesses

Personal FinanceTravel

Concerns Over Refunds For UK Holidaymakers

Money SavingPersonal Finance

Free Activities To Keep You Entertained During Lockdown

News

Covid-19 Financial Guide