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Loans and coronavirus

If you’re worried about the impact coronavirus could 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. 

If you’re worried about the impact coronavirus could 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
Do you know someone who could benefit from this article?
Posted 16 JULY 2020

Please note: The information in this article was correct at the time of publication on 13th October, 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?

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 2020 to do so. If you’ve suffered 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. You should also contact your mortgage lender if you’re having problems making your mortgage repayments too. They will work with you to come up with a solution to best suit your needs.

At the start of the coronavirus lockdown many financial institutions put in place measures to provide relief to affected customers struggling to pay off personal debts. These included payment holidays and scrapping fees for late payments. The initial three-month period was later extended by a further three months.

Now the Financial Conduct Authority (FCA) has said that lenders need to offer borrowers still facing financial difficulties tailored support to help them resolve their debt.

Lenders are now being expected to:

  • Work with customers coming to the end of a payment holiday to provide support, before they miss payments.
  • Be flexible and use a full range of shorter and longer-term support options to minimise stress and anxiety experienced by customers in financial difficulty.
  • Put in place sustainable repayment arrangements which are affordable and take account of customers’ wider financial situations, including other debts and essential living expenses.
  • Give customers time and opportunity to repay, without pressurising them into doing so within an unreasonably short time period.
  • Prevent customers’ balances from rapidly rising by suspending, reducing, waiving or cancelling any interest, fees or charges necessary to make that happen.
  • Recognise and respond to the needs of vulnerable customers.

What are banks doing to help loan customers?

Lenders are still reassuring customers that they’re there to support them through these uncertain times. If you haven’t already applied for a loans payment holiday or an overdraft, you still have up to 31 October 2020 to do so. If you’ve had one payment holiday you can ask your bank for another three-month freeze. Many banks now let you apply online or via their banking app, so you shouldn’t need to wait in a call centre queue.

If you’ve had two payment holidays you’ll need to get in touch with your bank to discuss your options. Because they’re dealing with many people in a similar situation, most banks are asking that you wait until you’ve heard from them before you get in touch, so that they can first deal with people whose holidays are coming to an end soonest. They should contact you a few weeks before your payment holiday comes to an end to explain what your options are. If you’re affected, the best thing to do is check online and see what your bank is saying.

If you can restart your payments then you should do so. If you can’t, most banks will ask you to complete an income and expenditure form before you speak to them. This is so they can give you personal advice and discuss what your options are. These can include things like reducing your monthly payments by extending the length of the loan, for example.

Lender Helpline
Barclays 0345 734 5345
HSBC 03457 404 404
Lloyds 0345 602 1997
NatWest 0345 366 5502

How will a payment holiday affect my loan and my credit rating?

If you’re taking a payment holiday, the FCA warns that although the measures are designed to help you, they may result in increased costs over the longer term.

If you already have a payment freeze, your credit file won’t be affected for the period of the payment freeze. But remember that the interest you owe will continue to build, so think carefully before you opt for one of these arrangements. Only do so if you need immediate, temporary financial help.

And please note that things are changing. If you need help from your lender, either at the end of your payment holiday, or for the first time, from October 2020 this will be reflected on your credit files in the normal way. This is to help lenders make sure they build an accurate picture of your financial circumstances, to reduce the risk of offering people loans they can’t afford to pay back. The FCA expects firms to clearly explain to you how your credit file could be impacted should you accept the types of support that you’re offered.

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 first. It might be easier to get in touch online rather than by phone, but check your lender’s website to see what they suggest.

If you’re also struggling to pay your mortgage, get in touch with your mortgage lender too.

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 UK 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.

Alternatively, small businesses can apply for a Bounce Back Loan for between £2,000 and £50,000 (up to 25% of their turnover), with up to 10 years to pay back what they borrow. Apply to your bank.

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, for example:

  • 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
  • Job Support Scheme to get Government help to subsidise wages for workers who can’t return to work full time. This is for well run businesses that are facing lower-than-usual demand

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. 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 like 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 out how to avoid coronavirus scams.

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