Payment holidays (and they are not just for mortgages)

INDIVIDUALS who are struggling with bills have until March 31 to apply to take a payment holiday from their mortgage, credit card, or loan. This means the holiday itself can last until July 31.

A payment holiday simply means that you don’t have to pay your monthly repayment for six months, and although interest on the debt will still mount up, you won’t count as being in arrears. Generally you’ll be given a three-month payment holiday before topping it up to six months.

After an initial six months, if you still can’t pay, you’ll have to apply for what is known as ‘tailored support’ for your debt payments, which includes an extension to your mortgage term, a further payment deferral or continued reduced payments. Under tailored support, missed payments will go on your credit file.

If you have a loan from a pawnbroker, or instore or catalogue credit that you can’t pay back, you can apply for a three-month payment holiday on this, too, although interest will still rack up on your debts. At the end of this period ‘tailored support’ is offered here as well, which will affect your credit file and your goods may be repossessed if you can’t keep up the payments.

UK Finance, which represents the lending industry, says that those who need payment holidays should apply before their February payments to make sure they get the maximum holiday if they need it, but that it is important to start paying back as soon as you can so as to avoid interest building up.

‘It will always be in the long-term interest of borrowers who are able to do so to resume making payments,’ says Eric Leenders, UK Finance’s managing director of personal finance.