Coming to the end of a payment holiday

If you’re coming to the end of a payment holiday, your lender will contact you about what happens next.

Payment holidays are offered in 3-month instalments. Therefore, if you’ve only taken one three-month break from making payments, and still face Covid-19 related financial difficulties, you may be able to extend the holiday by a another three months.

If you’re continuing to face financial hardship because of coronavirus, your lender should provide you with what the Financial Conduct Authority (FCA) calls tailored support.

What is tailored support?

If you’re no longer eligible for a payment holiday or do not want one, the FCA  has instructed lenders to provide tailored support. This must take into account your individual circumstances. And give you time to get back on your feet.

Lenders should be flexible. They could offer short or longer-term options to support you. These can include extended periods of reduced or zero payments. You should not be pushed into repaying your debt in an unreasonably short period of time.

Furthermore, to stop the size of the debt increasing, lenders should suspend or waive interest and fees. Where appropriate they may suggest that you seek money advice before agreeing a long-term repayment plan.

Remember your priorities like rent and mortgage

When working with you to agree what options are best for you (including the amount you can afford to repay) your lender will consider your essential living expenses, which include:

  • Mortgage payments, rent and council tax.
  • Reasonable food, clothing, health care and travel costs.
  • Other costs, where non-payment could result in the loss of your home or essential goods or services, for example gas or electricity.

If you are coming to the end of a mortgage payment holiday or are struggling to pay your rent, then you may wish to seek money advice.

High-cost short-term credit (including payday loans)

If you are affected by coronavirus, you can apply for a payment holiday of one month on high-cost short-term credit agreements. If you’ve already had a payment holiday, ask for tailored support.

Payment holidays and your credit file

Lenders shouldn’t be reporting payment holidays agreed under the regulator’s guidance to a credit reference agency as missed payments. Because of this your credit score shouldn’t fall.

However, coming to the end of a payment holiday means things change. Consequently, after a payment holiday has run its course and you take up tailored support this may be reported. Because of this your credit report may be adversley affected.

The lender might record the missed payments, making it hard for you to get credit now and in the future. Consequently, your credit score will also fall. Lenders may record an ‘arrangement to pay’ against any missed payment. This can help. But you are still likely to be declined for any new loan applications you make. If those missed payments become defaults, they will be on your credit file for three years.

About Adrian Davies

With a background in money advice, Adrian's been campaigning for fairer finance for 25 years.

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