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As a result of the disruption caused by the COVID-19 outbreak, consumers can currently ask for a freeze on credit card repayments for up to three months, until 31 October.
In addition to this, individuals who have already had a payment break will be able to ask lenders for a further three months ’ support, bringing the total duration of their payment holiday to 6 months.
While this may provide temporary respite to many who are struggling during these challenging times, there are also downsides to this which are worth being aware of.
Many have questioned whether providing a 6-month payment break to individuals will create more long-term problems. Interest will continue to build and missed payments will be added into future repayments meaning consumers could be storing up unmanageable debt for themselves at a later date.
For this reason, banks may become stricter with payment holidays, and may encourage people to make reduce payments based on what they can afford, rather than full payments breaks.
It is also important to note that while these payment breaks will not be shown on credit files, there are other ways for loan providers to check if individuals have struggled to maintain their credit repayments. For example, some may ask for bank statements which will clearly show the deferral of payments. This in turn may impact upon the ways in which people can borrow going forward.
If you are struggling with repayments, it is important you are aware of all the options available to you. When you contact us, our advisers will fully assess your current circumstances, and help not just with the short term, but also outline options to plan a debt free future.
KPMG have been providing debt advice to people living in Scotland for over 20 years and have helped thousands to overcome debt issues. If you are in need of advice, we are available 6 days a week on 0141 300 5656. Or alternatively, book a callback below and we’ll get back to you at your selected time.