Coronavirus payment holidays on credit cards and loans extended to March 2021

Borrowers will be able to apply for further payment holidays on credit cards, loans and other finance agreements.

The Financial Conduct Authority (FCA) has extended applications for payment breaks until 31 March 2021, as it seeks to offer additional support to borrowers during the pandemic.

Here, Which? explains how the new rules will work and how to apply for a payment holiday if you need one.

• Are you considering asking for a payment holiday, or have you applied for one in the past? If you'd like to tell us about your experience, please email money-letters@which.co.uk

Payment holiday deadline extended

The original deadline to apply for a payment holiday on credit cards, loans and other credit products passed on 31 October, and banks were expected to instead offer tailored support to customers facing financial difficulties from 1 November.

But with further lockdown measures now in place and the furlough scheme having been extended, the FCA has moved to extend payment holiday applications into 2021.

How will the new rules work?

The new rules for customers with loans, credit cards, motor finance, rent-to-own, buy-now-pay-later and pawn broking credit are as follows:

• If you haven't yet had a payment holiday, you'll be eligible for deferrals for up to a maximum of six months in total.
• If you currently have a payment holiday in place, you can apply for a further deferral to take you up to the six month limit.
• If you have already had one payment holiday, you can apply for a further deferral to take you up to the six month limit.
• If you've already had six months' worth of deferrals, are in arrears or are receiving tailored support, you won't be eligible for a further deferral.
• High-cost short-term credit borrowers (such as those with payday loans) who haven't already had a payment holiday will be eligible for a one-month deferral.
• If a lender assesses that a payment deferral is obviously not in your best interests, it should provide alternative tailored support.

The new rules come into force on 25 November, and borrowers will have until 31 March 2021 to request a payment holiday.

Taking a payment holiday means it'll take you longer and cost you more to repay your debt. With this in mind, the FCA says borrowers should only apply for payment holidays if they need them.

Support for overdraft borrowers

The FCA has confirmed that firms will continue to offer tailored support to overdraft borrowers, as set out in September. This could include:

• reducing or waiving interest;
• agreeing a programme of staged reductions in the overdraft limit;
• transferring the overdraft debt to an alternative credit product on more favourable terms.

Premium finance consumers will continue to benefit from the tailored support that was announced on 30 October.

When will payment holidays be available?

The new rules will come into force on 25 November, but the FCA has encouraged firms that are able to start providing support sooner to do so.

To get a payment holiday, you'll need to contact your lender directly. Some banks have online systems in place, but others will require you to phone them.

Will payment holidays affect my credit score?

The regulator says payment deferrals will not be reported as missed payments on your credit file, so they won't affect your credit score.

It is still possible, however, that lenders will look at whether you've taken payment holidays when considering applications for further credit in the future.

The FCA says that customers who have already benefitted from two payment deferrals (or one for high-cost short-term credit payment holiday) and are still experiencing payment difficulties should speak to their lender who will be able to provide tailored support.

Tailored support may be reported on your credit file, but the FCA says lenders should inform you if this will be the case.

What other options are available?

If you've already benefited from a payment holiday and are still experiencing financial difficulties due to COVID-19, the FCA says you should speak to your lender to get support.

Additional support may include short or long-term measures, such as offering sustainable payment plans with realistic timelines or cancelling, reducing or suspending interest payments.

What's happening with mortgages?

The FCA has published new rules for mortgage customers affected by the COVID-19 outbreak, who will be able to apply for new payment holidays until 31 March 2021.

The rules are as follows:

• If you've not yet taken out a payment holiday, you'll be eligible for two payment deferrals up to a maximum of six months in total.
• If you currently have a payment holiday in place, you'll be able to apply for one further three-month deferral.
• If you've resumed repayments after a payment holiday, you'll be eligible for another three-month deferral.
• If you've already had two three-month payment holidays, or have agreed alternative support with your lender, you won't be eligible for a further deferral.

Coronavirus news and advice from Which?

If you're struggling financially during the pandemic, you can get the latest advice on support measures on our coronavirus news and advice page.

For more on coronavirus and your money, the following stories may be helpful to you:

• Insurance providers set to offer further support during COVID-19
• How to protect your investments during the pandemic
• Self-employed income support to increase in November
• Furlough scheme extended ahead of new lockdown

This article was originally published on 3 November 2020. It has since been updated. The last update was on 20 November with further details from the FCA on extending support for borrowers.