COVID-19 Disruption

COVID-19 Disruption

Correct as of 22/07/2020. This is a rapidly changing situation and we will update content as regularly as we can.

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The scale and impact of the disruption COVID-19 is having on day to day life is significant. For many, this is an incredibly anxious time, and we are doing everything we can to support those who need help with debt during this period.

In line with the Government’s strategy, our full team are working remotely, whilst ensuring there is no disruption to our service. Our personal debt solutions advice team remains available by phone, SMS and email six days a week. Our advisers can be contacted on 0141 300 5656, or you can request a call back at a time which suits you.

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Managing short-term cash flow

The UK Government, Scottish Government and the Financial Conduct Authority (FCA) have introduced key measures if you’re facing short-term cash flow problems caused by COVID-19. Whilst these temporary measures are designed to help during this difficult time, they may result in increased costs in the longer term, so do think carefully before entering into one of these arrangements.

Personal loans and credit cards

If you are struggling financially due to COVID-19, and have not yet had a break from loan and credit card repayments, you can request one at any time up until 31 October.This payment break will last a period of 3 months, and will not be shown on your credit file, but please be aware lenders have other means of assessing affordability for lending, so payment breaks could still impact your ability to obtain credit in future.

If you have already had a 3 month break, you are now able to ask your lender for an additional 3 months, creating a 6 month holiday in total. However, banks are likely to impose strict measures to assess if this is the right course of action for you, before agreeing to let you do this. The focus has now moved to encouraging people to pay what they can afford where possible, rather than extended payment breaks which interest accrues and the total outstanding balance owed increases.

Concerns have been raised that giving individuals a 6 month payment holiday may create situations where they are ‘storing up’ unmanageable debt for a later date in life. During any payment holiday, your interest will continue to build, so if you can pay back some of your debt instead of requesting a holiday, this may be the best course of action for you in the long run.

Overdrafts

Until 31 October 2020, you can ask the provider of your main current account for up to £500 of overdraft borrowing with no interest for three months. This measure applies to personal current accounts, but not Basic Bank Accounts.

If you have already benefited from a three-month interest free period, and are still struggling financially due to COVID-19, you can request a further three months support. It’s important to be aware that interest will apply again at the end of this period, and with many banks increasing the interest rate on overdrawn balances in early 2020, this could lead to an expensive form of borrowing when the interest free period comes to an end.

Mortgages

On 17 March 2020, banks agreed with the Chancellor that they will offer three-month payment holidays to those who advise they are struggling due to COVID-19.

The FCA issued further guidance on 26 May, meaning that if you are still unable to pay your mortgage because of the coronavirus crisis you will now be eligible for a further three-month repayment holiday. If you are yet to request a payment holiday, you will be able to apply for one until 31 October 2020.

If you take a payment holiday, you will still be charged interest during this time and it will be added on to the total cost of your mortgage and factored into your repayments when you start making them again.

It is very important to note that taking a mortgage holiday must be agreed with the lender first. Do not simply stop payments without warning, otherwise they will be recorded as a late payment and most likely have an adverse effect on your credit file.

Motor finance

The FCA have extended the support available to customers with motor finance agreements who are struggling with repayments due to COVID-19.

If you’ve already taken a payment holiday and can afford to start making payments, even if partially, it is likely to be in your best interests to do so. If that is not possible, additional help is still available via further payment breaks for up to three months if required.

Additionally, the current ban on repossessions where payment difficulties arise as a result of the pandemic, has been extended to 31 October.

As with any arrangements for payment holidays or reduced payments, it’s important to speak to the lender to agree the reduced payments, otherwise they will be reflected on your credit file as missed payments.

Payday loans

Since 27 April 2020, payday loan customers have been able to request a payment holiday, however unlike the measures outlined above, the minimum requirement upon lenders is for one month, rather than three. If you have not yet had a payment holiday, the period to request one has been extended until 31 October 2020. If you have already had a payment freeze and are still experiencing payment difficulties, lenders should be supportive and work with you to assess affordable repayments.

Breathing space (statutory moratorium)

A moratorium provides breathing space for individuals struggling to meet their debt payment obligations and needing time to consider their options. The moratorium currently provides protection from creditor debt enforcement action for a period of 6 months, and the previous restriction on using it more than once in a 12-month period has temporarily been lifted. Note that the moratorium is a serious step that should only be taken when necessary and could damage credit ratings. Our advisers can help you consider this and alternative options.

Access to formal personal debt solutions

Recognising the difficulties with physically signing documents during the current period of restrictions upon movement, the use of electronic signatures is now permitted for individuals seeking to enter into a formal debt solution, such as a Trust Deed, Bankruptcy or Debt Arrangement Scheme.

Getting in touch with us

Through these challenging times, we will continue to look at ways we can help you as the situation in the UK develops. If you need support, we are here for you. Our advisers can be contacted on 0141 300 5656, or you can request a call back at a time which suits you.

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