Many households have been feeling the pinch during the coronavirus pandemic, with millions of people currently on furlough, unemployed and business owners facing uncertainty on when they can resume their business.
However, to minimise the financial shortfalls, the UK government has stepped in to offer payment holidays across a range of financial products, helping households to save and defer payments until later dates.
Being aware of these options can help the average Briton hold onto thousands of pounds in the short-term and ease any financial pressures they may be experiencing.
Mortgage Repayments
One of the first actions that the UK government issued was a payment holiday of up to 3 months on mortgage repayments.
The average UK household spends £671 on their mortgage each month and over the three-month period, could provide a saving of around £2,100 to the average family.
To be eligible, you will need to demonstrate a loss of income and difficulty in repaying your mortgage as a result of the coronavirus; and that you are not applying as part of a long-term financial issue. For an individual that has been missing repayments and over-using payment holidays in the last few years, they may fall under a stricter category.
Tax
The UK has offered VAT and self-assessment tax delays for individuals and businesses who are looking to manage their cash flow.
For many self-employed and small businesses, the ability to defer tax payments will offer a lot of breathing space short-term.
However, claimants should ensure that they have sufficient funds available when this payment becomes due, because it will also include the returns for that period and may result in paying double your normal rates.
Bank Accounts
For those using current accounts and business bank accounts, customers can use their overdraft during COVID-19 without incurring any fees.
This is currently limited to just £500, however, different terms may apply depending on the bank provider, your previous payment history and company turnover.
If you do not have an overdraft, you may request one from your bank and this may be subject to status.
If you are looking to open a business bank account during the pandemic, you can look at which companies do not offer any upfront or monthly fees, or give introductory offers and come with an overdraft facility.
Credit Card Debts
The FCA announced that all banks and credit card providers can offer customers the chance to freeze credit card payments for up to 3 months.
Customer that opt for this scheme will not see any impact to their credit score or incur any extra fees, but for many will benefit from the important breathing space.
This decision includes any credit cards and store cards; and banks have been told that they cannot suspend cards during this period either.
Whilst the eligibility criteria will be treated on a case-by-case basis by each bank or provider, this should not be seen as a long term solution and there may not be leniency on customers that regularly default on credit card payments.
Outstanding Loans
Part of the FCA announcement made on 2nd April confirmed that anyone with outstanding loans may be eligible for a three-month interest repayment, including personal loans, guarantor loans and business loans.
It was later confirmed on 17th April that customers can take a one-month payment holiday for peer to peer loans, car finance, short term loans and payday loans.
Customers will not have any impact on their credit score or be charged anything extra for this privilege, but they will still be liable for full repayments and be required to see through the full terms of their loans.
Every customer still has to apply for a payment holiday and those who are looking to avoid payment for longer periods, will be assessed very closely. For many financial institutions, they have ceased lending in recent weeks over uncertainty surrounding customer income and affordability, but those looking for an opportunity to compare loans and take out money quickly with the aim of taking payment holidays will not be eligible.
No Fear of Repossession
Finance providers and card issuers have confirmed that customers will not be at risk of repossession of any properties, vehicles or assets during the coronavirus pandemic. This will give further peace of mind to those with debt on their shoulders and payment holidays should be explored to help reduce any potential debt problems.
