Debt Series: #2 Help with debt during the pandemic

The Financial Conduct Authority (FCA) has introduced a lot of new measures to help people who are struggling to keep up with debt repauments. Let's look at what help is available and what to watch out for.

All the measures that have been introduced are there to provide temporary support. It's worth spending a little time to figure out if these are the right moves for you as they could end up costing you more in the long run.

If you haven't nailed your budget and cut out any unnecessary spending, check out the first article and tackle that stuff first.

How to access help

Don't just stop making payments.

In all instances you need to contact your provider. With such a high demand it can be tough getting through by phone.

Your lender's website is always a great starting point. It will detail what they are doing, any terms and conditions, and in many cases you can also apply online.

Personal loans & credit cards

You can freeze or reduce repayments for up to three months. The period will last from the time you agree the details with your lender. Luckily, this will not affect your credit score.

If you’re still having trouble making payments after the end of your three month break, you can speak to your credit card company about further help.

This doesn't just apply to personal loans and credit cards. Store cards, catalogue debt, guarantor loans, logbook loans and home collected credit are also covered buy these measures.

Overdrafts

Up to £500 is now interest free. People with existing overdrafts on personal current accounts will benefit from the new measures.

If you're after a new overdraft or a a bigger overdraft (subject to checks and affordability), you'll be able to get the same deal.

Mortgages

A three month mortgage holiday or reduced payment period is available to all homeowners. The holiday period will be calculated from the time you reach an agreement with your lender.

If you take a mortgage holiday or reduce your payments for three months due to coronavirus, it wont affect your credit score

An additional mortgage holiday can potentially be negotiated if you’re still having trouble making payments at the end of the three months.

Don't forget, interest will still be charged but it will be added to the mortgage balance.

Other credit

Proposals for a number of other types of credit are still being negotiated. these include:

• High-cost short-term credit (including payday loans) - 10 month freeze
• Motor (Car) Finance - Up to a three month freeze
• Buy Now Pay Later - Up to a three month freeze
• Rent to Own - Up to a three month freeze
• Pawnbroking - Up to a three month freeze

If approved, these measures are expected to come into force on 27 April 2020, so keep an eye out for those.

What's next?

In our next article we'll look at the different types of debt and how to tackle them. If you have any suggestions for topics that you would like to see us cover during these times please contact us at support@multiply.ai.