STRUGGLING payday loan customers and overdraft users have until October 31 to apply for payment holidays and a £500 interest-free buffer.
The temporary support was set out by the Financial Conduct Authority (FCA) earlier this year to help Brits affected by the coronavirus crisis.
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But the financial regulator has today proposed new support, which says lenders should give users tailored help depending on their individual circumstances.
The FCA said that although the majority of consumers will start to resume payments in full from November, many will remain in financial difficulty.
Credit users currently have until October 31 to apply for a payment freeze, while overdraft users can apply for a £500 interest-free buffer by the same date.
If you apply ahead of the deadline, the support will be available until January 31, 2021.
What is a payment holiday and should you apply for one?
PAYMENT holidays are when a lender agrees to pause your monthly repayments for a set amount of time.
This has to be agreed in advance, so don’t stop making your repayments until your bank has given you permission to do so.
The majority of lenders are now offering payment holidays, so get in touch with your bank to find out what help it can give you.
Most of the time, it’ll require you to fill out an online form.
Typically, payment holidays are offered in extreme circumstances and are designed as an emergency measure to help you through a difficult financial time.
If you think you need to take one, you should speak to your lender to discuss your options – but do note that the break in payments doesn’t remove any debt or financial obligations.
Most lenders will also still charge interest during this time, so be aware that these costs will keep building up.
You should also always continue to make your normal payments if you’re financially able to.
Sue Anderson, head of media at debt charity StepChange, said: “If you can continue to make your normal payments without difficulty, then you should.
“Any temporary measures being offered by lenders don’t remove financial obligations – they are designed as an emergency measure to help you get through a period where your income may have taken a serious knock.
“However, if you need to use them then you shouldn’t hesitate to talk to your lenders.
“While taking a payment break would usually be noted on your credit file, the credit reference agencies have confirmed that, during the current crisis, this should not have a future influence on your credit status.”
If you don’t, new proposed help includes repayment arrangements which must take your wider financial situation into account.
Customers should also be given time to repay and not be pressured into repaying debts within an unreasonable short period of time.
Firms will also be expected to prevent customers’ debt balances from escalating by suspending, reducing, waiving or cancelling any interest, fees or charges.
They’ll also be expected to contact overdraft customers who’ve received temporary support to determine if they still need help.
If you do, firms may reduce or waive interest, start a staged reduction in the overdraft limit, or transfer the debt to reduce your overdraft usage.
The industry now has until 10am on September 21 to comment on the new draft guidance by the FCA.
More to follow…
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