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Loans and coronavirus

Loans and coronavirus

If you’re worried about the impact coronavirus will have on your ability to make loan repayments, read our guide to find out what help is available. We also answer your questions on student loans and whether you can get a loan for your business. 

Anelda Knoesen
From the Money team
4
minute read
posted 16 JULY 2020

Please note: The information in this article was correct at the time of publication 16 July 2020 but, because of the impact of COVID-19, things are changing rapidly. We aim to keep this page updated, but please check with your loan provider or potential provider directly to confirm any details.

What should I do if I can’t repay my loan because of coronavirus?

Many financial institutions put in place measures to provide relief to customers affected by the coronavirus outbreak who are struggling to pay personal debts. These include payment holidays and scrapping fees for late payments.

Now the Financial Conduct Authority (FCA) has confirmed an extension of some of these measures. Firms will continue to offer three-month freezes on personal loan or credit card payments to customers still facing difficulties because of coronavirus.

And people negatively impacted by coronavirus and who already have an arranged overdraft on their main personal current account can request up to £500 interest-free for a further three months.

If you haven’t yet requested a payment freeze or an arranged interest-free overdraft of up to £500, you now have until 31 October to do so.

The FCA warns that although the measures are designed to help you, they may result in increased costs in the longer term. Although your credit file won’t be affected for the period of the payment freeze, interest will continue to build. So, think carefully before you enter into one of these arrangements and only do so if you need immediate, temporary financial help.

If you can afford to make some repayments – even if it’s a smaller amount than usual – you should continue to do so.

Don’t just stop making repayments – you need to contact your loan provider to make the request. It might be easier to get in touch online rather than by phone.

The move comes in addition to the Chancellor’s announcement that struggling homeowners may be able to get a three-month mortgage holiday amid the crisis.

If you’ve been hit financially because of COVID-19 and think you’ll struggle to keep up with your loan repayments, contact your lender as soon as you can. They will work with you to come up with a solution to best suit your needs. They may also look at temporary increases in credit card or overdraft limits to support you further.

What are banks doing to help loan customers?

Lenders have begun emailing customers to reassure them that they’re there to support them through these uncertain times. Here's what the UK’s biggest banks are doing for those who anticipate problems repaying their personal loan because of coronavirus:

Lender Support available Helpline
Barclays Barclays is encouraging customers to speak to its specialist teams who have a range of measures to support people worried about repaying their loan. It’s also working on an online application form to request a payment holiday. 0345 734 5345
HSBC HSBC is offering reduced payments or breathing space to defer payments to anyone with unsecured debt who needs help. Its support will be tailored to people’s individual needs. 03457 404 404
Lloyds Lloyds Bank has waived its fees for missed payments on loans. It’s also offering payment holidays, with additional support for customers who need it. 0345 602 1997
NatWest NatWest is offering payment deferrals of up to three months to support those financially affected by coronavirus. 0345 366 5502

Will student loan repayments still be taken if I can’t work due to coronavirus?

No, you only make repayments to your student loan when you’re earning over a certain amount, depending on your repayment plan type. That means that if you’re no longer working because of coronavirus, or your income drops below the threshold, your repayments will stop too. This will be done automatically through the tax system.

Will I still get my next student maintenance loan payment?

If you have a loan to cover the cost of your living expenses, the Student Loans Company has confirmed that you will receive your scheduled or next instalment of your maintenance loan at the planned start of the summer term. This is regardless of whether your university has made alternative arrangements for teaching.

See government guidance on student finance and COVID-19.

 

Can I get a loan for my business?

The Government has set out a raft of loans, grants, tax relief and wage support to help businesses through the COVID-19 crisis. This package of measures includes the Coronavirus Business Interruption Loan Scheme.

Small and medium-sized businesses with a turnover of no more than £45 million can borrow up to £5 million for up to six years. The loans are interest-free for the first 12 months and the Government will guarantee 80% of the loan amount to give banks the confidence to lend.

The loan scheme opened on 23 March and is being offered by all major banks, although some lenders have come under fire for insisting on personal guarantees to issue the emergency loans to business owners.

Large firms may be able to apply for corporate bonds provided by a lending facility within the Bank of England.

Before applying for a loan, consider whether other initiatives might help, such as:

  • 100% business rates holiday for the next 12 months for the retail, hospitality and leisure sectors in England
  • Grant funding of £25,000 for retail, hospitality and leisure businesses with property with a rateable value between £15,000 and £51,000
  • small business grant funding of £10,000 for all businesses in receipt of small business rate relief or rural rate relief

Find out more about government support for businesses.

Should I apply for a personal loan during the coronavirus crisis?

If your income takes a hit or dries up completely because of the coronavirus outbreak, you may be eligible for benefits or wage support. So, first of all, make sure you’re claiming everything you’re entitled to and check whether you have any insurance policies that cover loss of income. You might also have savings you can draw upon. Most banks will allow you penalty-free access to fixed-rate savings accounts amid the coronavirus outbreak.

But if you’ve exhausted all these options and need emergency cash to cover expenses, you may need to borrow money. Compare personal loans to find the best interest rate and annual percentage rate (APR), otherwise you might find you’re paying back more than you need to.

Should I take out a payday loan?

There are many pitfalls associated with this type of loan. Interest rates are very high, and costs can soon spiral out of control if you find you can’t repay the loan on time and in full.

Are there any coronavirus loan scams to watch out for?

Fraudsters are taking advantage of the coronavirus outbreak to scam people out of money. Be wary of anyone contacting you pretending to be from your bank offering financial help such as payment holidays on loans as a way of getting you to reveal your account details.

Banks will never ask you for your full PIN, password or card reader codes. Always check any calls and emails you receive are from legitimate sources and don’t give out any personal information.

Find how to avoid coronavirus scams.

Find how to avoid coronavirus scams

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