Credit Cards and Borrowing

With the majority of us having loans, car finance and credit cards our ability to pay them off has now been put into question.

 

So what are the credit card companies doing to help us during this stressful time?

The first thing you should do is contact the credit card companies and let them know you are on reduced income and having difficulties. Don’t just miss a payment.

If you are struggling you can ask for a payment freeze and a positive side of this is that your credit rating won’t be affected by a temporary freeze due to the Corona Virus hardship if you have to repay:

  • Credit cards
  • Store cards
  • Personal loans
  • Guarantor loans
  • Logbook loans
  • Home collected credit
  • Certain Credit Union loans
  • Loans from Community Development Finance Institutions (CDFIs)

Also, these lenders would have to be regulated by the Financial Conduct Authority (FCA) for these rules to apply. The FCA have asked firms who supply buy now pay later arrangements, certain car finance hire purchase or Personal Contract Purchase (PCP) and Payday Loans to come up with a package of support measures.

 

What your lender will discuss with you?

If you request a temporary payment freeze, your lender is required to explain what this will mean for you in the future.

This will include information on any increases to your repayments after the payment freeze ends and any interest payments built up over this time.

Firms are not prevented from changing interest during the payment freeze and credit card providers might ask you to make token payments of less than £1 during this time.

Lenders and providers might decide to give you another option other than a three month payment freeze.

If you’re expecting your loss of income to be temporary, for example if you have to self-isolate, or care for someone with coronavirus but will then be returning to work, you might be offered a payment freeze of less than three months.

If you’ve only experienced a partial drop in income, you might be able to make reduced payments rather than take a payment freeze.

However, you will need to contact your lender or card provider to discuss these options.

The temporary payment freeze has been introduced for three months, but it might be extended.

If it is not extended, loan and credit card repayments will start automatically once the three month period ends.

If after the freeze you’re still finding it hard to make repayments you should contact your lender or provider to discuss your options.

If you were already struggling with repayments

If you were already having difficulties making payments before the coronavirus outbreak, these new rules will not apply to you.

Any agreements you already had in place with your lender or provider, such as reducing or cancelling further interest charges, will continue to apply.

If you’re struggling to make loan or credit card repayments you should speak to your lender or provider about what options are available to you or get debt advice.

 

Worrying about debt?

Facing a sudden drop in income if you’re already juggling other debts can have a severe impact on your finances and is probably the last thing you need right now. Don’t let the problem get out of hand. Don’t let it bog you down and keep you awake all night. You may have been managing to make repayments on money you owe but this crisis is going to push you into problem debt.

Although there may be a lot going on in your life that makes it easy to ignore debt, the sooner you get help the sooner you can get back on track.

There is so much free, confidential debt advice out there to support you and you don’t have to face the problem alone. Talking to someone can mean one less problem off your mind. Our advisors at Help Debt Plus are always on hand with free advice to speak with you and help you through all your debt problems and get you on the right road to financial recovery.

Avoid Loan Sharks

Loan sharks are illegal lenders who often target people who are desperate and who can’t get mainstream credit. They might seem friendly at first but borrowing from them is never a good idea – even if you feel you have no other options.

Loan sharks will start out appearing friendly. And if you keep up your repayments, they might stay that way.

But the reality is, even if you do, any money you borrow will come at a very high price.

There are many risks attached to borrowing from a loan shark:

  •  you pay far more in interest than you would through any legal borrowing.
  •  you might be harassed or threatened if you get behind with your repayments – there have been reports of people being intimidated or attacked
  •  you might be pressured into borrowing more money to repay one loan with another, and end up in a spiral of debt that you can never repay.

As hard as it is to believe people could be so unscrupulous, it’s true. They are out there and financial hardship and preying on vulnerable people is their speciality. Don’t be tempted. If you have been approached by someone you think is a loan shark, you need to report them and contact the police if you are in immediate danger.

Find out how to report a loan shark on the GOV.UK website

Help from the Government

If you are short of money, ensure you are getting all of the benefits you are entitled to. There is help out there and sometimes you need a helping hand to guide you.

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