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Payment holiday for debt repayments

What are payment holidays?

If you’re struggling to keep up with your regular payments, your creditors may agree to a short-term payment holiday. You can ask for credit card payment holidays and breaks in making mortgage payments.

The missed payments during this period will usually be treated as arrears and interest and charges may continue to be added.

How do payment holidays work?

You can request a payment holiday, but the creditor doesn’t have to agree to it.

The gap in payments may be marked on your credit file and this may make it harder to get credit in future. Depending how long the break in payments is, your creditor may issue a default notice.

Payment holiday letters

Under the rules of the Consumer Credit Act, lenders are required to send customers warning letters when they miss two payments, even if this break was agreed with the creditor.

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Payment holidays and coronavirus

Can I get a credit card payment holiday?

New rules, including payment holidays, are being introduced to help people whose finances have been affected by coronavirus.

signpost iconFor the latest information, read our guide to how creditors are helping people deal with debts caused by coronavirus.

The Financial Conduct Authority (FCA) has announced a range of changes affecting consumer credit. The following have been made available for three months:

  • Interest-free overdrafts up to £500
  • Payment holidays for credit cards, loans, store cards and catalogues, car finance, hire purchase and high cost credit

Payment holidays relating to coronavirus won’t affect your credit score.

The Scottish Government has extended the ‘moratorium’ period for people who have debts from six weeks to six months. During this time creditors aren’t able to take action to recover the money owed. If you're considering a moratorium, you don't need to get debt advice from an approved money adviser, but we do recommend you do so.

Can I get a mortgage payment holiday?

Mortgage payment holidays are in place for people who are struggling with their repayments. You can apply for one if you've kept up-to-date with your payments. You don't need to provide proof of how your finances have been affected by COVID-19.

There are other ways your lender may be able to help you, such as allowing you to reduce payments.

You can request payment breaks even if coronavirus hasn't affected you. Find our more about dealing with mortgage arrears.

Can I get a break from paying my rent?

The Scottish Government has extended protection for people renting. If your landlord wants to evict you for rent arrears, they'll need to give you six months' notice before they can start court proceedings.

In England and Wales, the courts have suspended all repossession proceedings. However, your rent is still payable during this time. You can ask for a payment break, but there's no guarantee the local authority or landlord will agree.

Read our guide to dealing with rent arrears.

signpost iconHave you been furloughed, made redundant, or had your income reduced because of coronavirus? Read our guide to dealing with reduced income.

How do I ask for a payment holiday?

If you’re considering asking for a payment break, you’ll need to give your bank, local authority or landlord some information to support your request.

They’ll probably want to know about your income, living expenses, any other debts and any change to your financial situation. You do this by creating an income and expenditure form based on your budget.

signpost iconFind out how to complete an income and expenditure form to send to your creditors

You'll need to tell your creditors the reason you're asking for a payment break and when you'll be able to start making normal payments again.

If your creditors agree to a payment break, ask them to send you a letter or email to confirm this.

Payments you should have made will need to be paid after the payment break ends, either by increasing the amount of your future payments, or by adding extra months to the end of the agreement so it takes longer to pay back.

Be prepared that creditors may not agree. If they don’t, contact us and we can look at alternative ways to help you deal with a short-term debt problem. Some creditors will point you towards a free debt advice agency like us anyway if you contact them to ask for a payment break.

people icon You can use our online debt advice tool to help you put together a budget to send to your creditors.

What happens at the end of a payment break?

Interest may still be charged for the period your payments were frozen, leaving you with higher payments to make in the future.

It's very important for your financial situation that you prepare in advance for the end of your payment break, and take into account what will happen to your debts. In most cases: the following will happen:

  • Mortgage - your monthly payment will rise, to take account of the missed payments and extra interest not paid. How much higher your payments will be, depends on how long is left on your mortgage term. Generally, the longer the remaining term, the lower the increase in payments will be
  • Loan - as with a mortgage, your monthly repayment to the loan will rise to cover the missed payments and additional interest charged during the payment break
  • Credit card - your monthly minimum payment will rise, to take account of the extra interest that has not been paid

"They were so kind, they listened patiently and helped me through the process" Alison, Kent