You are here: Home - Credit Cards & Loans - News -

Borrower ‘confusion’ about payment holidays

Written by: Emma Lunn
There is widespread confusion over payment holidays and the potential impact on people’s future finances, according to complaints website Resolver.

More than a third of those who had taken a payment holiday didn’t realise that lenders were allowed to charge interest on the outstanding balances or when this would be payable.

One in seven (15%) respondents had taken at least one payment holiday on a mortgage, loan or other financial agreement. Two in 10 had been forced to use their overdraft facility during lockdown to make ends meet – and of those, just under half had strayed in to the ‘charging zone’ of £500.

Resolver found that four in 10 people who had taken a payment holiday didn’t have all their options explained to them. More than a third of people were concerned about paying back their debts.

Payment holidays

To help people face the financial challenges posed by the pandemic, the Financial Conduct Authority (FCA) introduced rules for lenders so they could offer people ‘holidays’ from mortgage, loan, credit and other financial debts.

Mortgage lenders will allow borrowers who are concerned about being able to meet their mortgage repayments to take up to six months of payment holidays. Mortgage holders have until 31 March 2021 to apply for a payment holiday.

Borrowers can also ask for a payment freeze of up to three months on loans and credit cards. Alternatively, customers will be able to pay a token amount.

Credit score confusion

However, many lenders have been reluctant to confirm if their customer’s credit scores or ‘lending status’ were being affected as a result of taking a payment holiday.

Alex Neill, Resolver CEO, said: “After a year of turmoil and uncertainty, the option to take a break from financial commitments has undoubtedly been essential for struggling households around the UK. But the idea that they’re some sort of no-strings ‘holiday’ is simply not the case.

“Resolver’s survey reveals that many people simply did not understand the full impact of taking a payment holiday on their finances – and have not received enough information or clear options on what will happen next if they continue to struggle.

“With the impact of coronavirus continuing and 1.7 million people out of work, it’s clear lenders will need to do more to provide support and improve communications to those that require much needed relief in the face of financial difficulty, helping them to budget and plan for any longer-term issues.”

There are 0 Comment(s)

If you wish to comment without signing in, click your cursor in the top box and tick the 'Sign in as a guest' box at the bottom.

Unfamiliar banks woo savers with top rates…is your money safe?

If you’ve been keeping an eye on the savings best buy tables, you’ll have noticed some unfamiliar names lu...

What the base rate rise means for you

The Bank of England has raised the base rate by 0.25% to 0.5% – following on from the increase from 0.1% to ...

How to get help with your energy bills

The rise in the energy price cap from April will mean millions of households will pay hundreds of pounds a yea...

What will happen if rates change

How your finances will be impacted by a rise in interest rates.

Regular Savings Calculator

Small regular contributions can build up nicely over time.

Online Savings Calculator

Work out how your online savings can build over time.

Having a baby and your finances: seven top tips

We’re guessing the Duchess of Cambridge won’t be fretting about maternity pay or whether she’ll still be...

Protecting family wealth: 10 tips for cutting inheritance tax

Inheritance tax - sometimes known as 'death tax' - can cause even more heartache for bereaved families. But th...

Travel insurance: Five tips to ensure a successful claim

Ahead of your summer holiday, it’s important to make sure you have the right level of travel cover or you co...

Money Tips of the Week