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    Long and short term loans during...

Long and short term loans during coronavirus: what to do if you’re struggling

We’re on a mission to help everyone move on up to a better financial future, so we’ve put together this guide on what to do if you’re struggling with loans payments during the coronavirus pandemic. It's updated on a regular basis, so you can have all the latest info in one place.




I can’t pay my loan

The Financial Conduct Authority (FCA) has released new guidance so banks and lenders are able to give customers who are struggling a three month break from payments. You have until 31st October to ask for a payment holiday from your lender.

You should only take a three month break if you really need to. Interest will still be added so your payments afterwards will likely increase. If possible, making smaller payments is better, so you should do this if you can.

If you do need to apply for the payment break, contact your lender as soon as possible. Don’t cancel payments before speaking to the bank or lender. They are likely to be much busier than usual, so it may take a while to get a response.


You can find the application form for a payment holiday below. Click the name of the bank to go to their website. If your mortgage provider isn't listed, visit their website.

Barclays
Clydesdale
HSBC
Lloyds
Nationwide
RBS
Sainsbury's
Santander
Tesco
Yorkshire Building Society


If you were struggling with your finances before coronavirus, talk to your lender about this. Banks and lenders should consider other options for you, such as reducing or cancelling interest charges, or accepting smaller payments. Talk to them to find out what your options are.



What happens when the payment holiday ends?

Your lender should contact you when your payment holiday is coming to an end. If you can afford to start making repayments after the three month holiday then you should do so.

If possible, it’s best to make some repayments, even if it is not the full amount. Talk about your repayment options when the lender contacts you.

But, if you are still struggling and can’t start making payments again, the Financial Conduct Authority has announced that customers can ask their bank to extend their payment holiday for another three months.



If I don’t pay my loan, will it harm my credit score?

If you have an agreement with your lender, such as a repayment holiday or reduced payments, it won’t affect your credit score.

If you miss a payment without an agreement in place, it will be treated as a missed payment and could harm your score. This includes if you ask for another three month payment holiday.

You can see if your payment holiday has been recorded by the lender by checking your free credit report. If it shows a missed payment, you can raise a dispute on your report to get it sorted. You should also double-check with your lender, to make sure it doesn’t happen again next month.

It’s best to check your report on a regular basis, as it may take a while to update.

Check my credit report now

If you make sure everything is as it should be now, it'll make it easier when things go back to normal. With a good credit score, you can get the credit you need when you need it, improve your financial footing, and move on up to a better future.




What about buy now, pay later (BNPL) services?

If you’re struggling to make payments for a BNPL service, contact the company as soon as possible and explain your situation.

The Financial Conduct Authority has released new guidance for these companies. It means you can request a three month extension of your promotional interest-free period if you have been impacted by the coronavirus. You can request this break until 31st October.

That means you have more time to make your repayments without any added interest.

If you're not in your promotional period, you can request a three month payment break. But, interest will still be added during this time.



Should I use buy now, pay later (BNPL) at the moment?

Your BNPL company will contact you when you’re near the end of your payment break. If you can afford to start making repayments after the three month holiday then you should do so.

If possible, it’s best to make some repayments, even if it’s not the full amount. Talk about your repayment options with the company and explain your situation.

If you’re still within your promotional period and struggling to repay, you can request another payment break.



What happens after the three month extension?

BNPL services may seem like a good idea at the moment because it means you can make smaller payments over time, or delay payments until later.


But, it’s important to know that missing BNPL payments can harm your credit score. So, if you choose to use these services, make sure you can keep up with the repayments.

If you want to spread your payments on essential purchases right now, a credit card could be a more secure way to pay at the moment.

And, you can protect all credit card transactions over £100 thanks to Section 75 of the Consumer Credit Act. Find out more details about how you can stay protected with a credit card here.


What about Rent to own (RTO) agreements?

If you’re struggling to pay a rent to own agreement, you can apply for a three month payment break. This covers RTO agreements such as TVs, dishwashers and fridges. You have until 31st October to ask for this break .

The guidance from the Financial Conduct Authority says RTO companies should offer customers a three month payment break, and repossession shouldn’t happen if a customer needs the goods during this time. For example, you will need a fridge. This ban on repossessions is in place until 31st October.


Will I still be charged interest?

Yes, on a payment break you will still be charged interest on the payments.

Contact the RTO company as soon as possible if you are struggling with payments and want to apply for the payment break.

You should also find out what will happen after the break. For example, your monthly payments may need to increase, or you might have to pay off the product over a longer period of time.


What happens after the payment break?


The RTO company should contact you when the three month payment break is coming to an end. If you can afford to start making repayments, you should do so.

If possible, it’s best to make some repayments, even if it’s not the full amount. Talk about your options with the company and explain your situation.

If you’re still struggling to make any payments, you can request another three month payment break from the company when they contact you.



If I miss a RTO payment, will it affect my credit score?

If you’ve agreed a payment holiday with the RTO company, it won’t affect your credit score. But, if you stop making payments without telling the company, it will be treated as a missed payment and could harm your score. So, it's best to do this as soon as possible if you're struggling.

You can see if your payment holiday has been recorded correctly by checking your free credit report. If it shows a missed payment, you can raise a dispute on your report to get it sorted. You should also double-check with the company, to make sure it doesn’t happen again next month.

It’s best to check your report on a regular basis, as it may take a while to update.


Check my credit report now


What about payday loans?

The Financial Conduct Authority has also given guidance to payday loan firms. If you have a loan with a payday firm and are struggling to repay, you can apply for a one month interest-free payment break. You can apply for this until 31st October.


Why is it only a one month break?

The company should contact you when the break is coming to an end. If possible, it’s best to make some repayments, even if it’s not the full amount every month.

Companies have been asked to act fairly, so explain your situation and agree a repayment plan that works best for you. If you are still struggling to repay, the company may consider giving you another one month break from payments.


What happens after the month break?

Companies have been asked to act fairly. This means you can arrange a repayment plan after the month break that works best for you. This could be a lump sum or smaller amounts on a regular basis.


I can’t pay my pawnbroker

The Financial Conduct Authority (FCA) has released guidance for pawnbrokers. If you can’t pay your pawnbroker, the FCA says the broker should extend the redemption period by three months. So, you will have a three month payment break before you need to pay the pawnbroker. You have until 31st October to ask for this break from your pawnbroker.

If your contract has ended and you’ve not been able to repay and get your pawn, the pawnbroker should agree not to sell the item for three months. If you’ve already had a notice that the item will be sold, you can ask to stop this.

Contact your pawnbroker as soon as possible if you’re having problems making your payment.


Will interest be added during the payment break?

Yes, pawnbrokers can still charge interest while you have an extra three months to repay.


What happens after the payment break?

Your pawnbroker should contact you when the three month payment break is coming to an end. If you can afford to start making repayments after the three month holiday then you should do so.

If possible, it’s best to make some repayments, even if it is not the full amount. Talk about your repayment options with the pawnbroker and explain your situation.

If the loan is still in the redemption period, and you’re still struggling to make any payments, you can request another three month payment break.


I’m worried about getting into debt

Debt charity Stepchange offers free help and advice to those struggling. They can guide you through sensitive matters, and have a host of information on their website about debt and coronavirus.

Their phone lines are still open but there are less staff working, so bear this in mind when calling.


Visit the Stepchange website

Citizens Advice is also available to give free and confidential advice. They cover a range of issues, including debt. As well as guides and information online, you can talk to someone online and over the phone, though this may take longer than usual at the moment.

Visit the Citizens Advice website