Extra short-term help will now be made available to some people with an overdraft, a credit card or a loan, the Financial Conduct Authority (FCA) has confirmed.
Here is a look at how you could benefit:
We will be going ahead with the consumer credit proposals outlined last week, which will provide temporary financial relief to those facing payment difficulties during the #coronavirus (Covid-19) pandemic. Find out more https://t.co/zN1Z0pJdxD#coronavirusuk#COVID19#FCAupdate
— Financial Conduct Authority (@TheFCA) April 9, 2020
– What has been announced?
If you have an arranged overdraft, you can ask the provider of your main current account for up to £500 of overdraft borrowing with no interest for three months.
If you have a personal loan, credit card, store card or catalogue credit, you can ask for a freeze on repayments for three months. Personal loans also include guarantor loans, logbook loans and home collected credit.
– When is this happening?
All firms will be ready to receive customer requests by April 14, although some firms including the major banks and building societies, will be adopting the changes immediately.
– How can I find out more?
Some providers have already announced they will provide interest-free overdraft facilities – check your provider’s website in the first instance to find out more.
Requesting help online may be quicker than trying to get through to a call centre at the moment with lines already being busy due to the coronavirus pandemic.
More details generally about what the FCA has announced are also on its website.
– My finances aren’t in trouble at the moment but I would like to take a payment freeze anyway. Should I make a request?
Bear in mind that interest may still build up, so if you freeze your payments now you could end up paying more in the long run. The relief on offer is intended for people who are struggling financially in the short-term because of coronavirus.
If you are financially impacted but you continue paying something, you may want to ask your lender if you can make part-payments for a while.
– Will my credit file be affected by a payment holiday?
Your credit history affects your ability to take out future loans. But FCA has said firms should ensure consumers using any of these temporary payment freeze measures will not have their credit file affected.
– What if I’m still in trouble when the temporary measures end?
The FCA says if you are not able to re-start repayments at the end of this period, then it expects the firm to provide forbearance. This may include waiving the interest that has built up during the payment freeze period.
Forbearance normally means arranging other ways to pay your debts. However, this may affect your credit file and it could lead to your lender freezing access to your credit.
– What if my arranged overdraft limit is more than £500?
Firms are only required to provide up to £500 interest-free.
– What if I don’t have an overdraft or my limit is less than £500?
You can request a new overdraft or an increased limit. But bear in mind this will be subject to normal checks on affordability.