Covid-19 – Creditor support guide
Covid-19 – Creditor support guide
If you’ve been made redundant, found yourself facing reduced earnings on furlough or otherwise been left struggling financially because of the COVID-19 outbreak, you may be wondering how you’ll pay your bills.
It’s good to know, then, that both the government and the FCA have introduced a variety of measures to support the public through this very worrying time – and creditors have been expected to get on board. Generally, banks, mortgage lenders and other creditors are being flexible and understanding – and, much like the rest of us, simply embracing the new normal.
If you do think you’ll struggle to make payments in the coming months – whether that’s your mortgage, rent, council tax, car payment or any other type of debt – the best advice is to make contact with your creditor as soon as you can. Beyond that, here’s a quick summary of the many ways in which creditors are offering support at this very difficult time.
Council tax bills
Worried about falling into arrears with your council tax? Your local authority might be able to help.
Although most households will be expected to pay their council tax as usual, £500 million has been granted to local authorities by the Treasury to help with the financial strain of coronavirus.
How they use this money will be at the discretion of your local council, but some may be offering council tax relief or support grants at this difficult time. It’s best to check your local authority website to find out what support they’ve decided to make available during the pandemic.
Energy bill support
If you’re concerned that you won’t be able to pay your energy bills because the Covid-19 outbreak has left you in reduced circumstances, know that support is out there. Your supply will not be cut off, and, according to industry regulator Ofgem, energy suppliers have pledged that no vulnerable customers will be left powerless.
You should aim to speak to someone at your energy company as soon as you can to let them know if you think you’ll struggle. Policies vary between companies, but they may offer you:
- The option to pause or reduce gas or electricity bill payments
- A reassessment of your current position if you’re already in arrears
- The opportunity to apply for special support if you’re classed as a vulnerable customer.
Help with car finance
Although there isn’t yet consensus yet from the motor industry on how they’ll be helping consumers with car finance payments, it’s expected that FCA guidelines may come into effect from 27 April.
They’ve proposed support measures that include offering the option of a three-month payment break and stopping vehicles from being repossessed.
If you are struggling with your car finance payments and haven’t yet spoken with your finance provider, it’s always best to let them know. They may be able to offer you interim support until the FCA support package is finalised.
Loan and credit card payments
If you’re due money on a loan, credit card or catalogue bill, you have the option to apply for a three-month payment holiday (though you will still be charged interest during this period).
When the three-month period comes to an end, you’ll go back to paying at least the minimum payment due as usual. And if you continue to make payments after the holiday, this shouldn’t have a negative impact on your credit file.
Moratorium on debt collection
Usually, you can apply for one moratorium on debt collection per year, and it lasts for a maximum of six weeks. “Moratorium” simply means a relief period in which your creditors won’t pursue you.
However, due to the coronavirus outbreak, moratoriums on debt collection in Scotland have been extended to a full six months to provide extended relief to those who owe money, and there’s no limit to how many you can apply for.
If you’ve found yourself in the position that you have to apply for a moratorium, it could be time to seek help with your debt.
Banks must provide the option of a three-month mortgage holiday to all consumers who are struggling with their repayments because of the Covid-19 outbreak.
If you’re granted a mortgage holiday, you stop making payments towards your mortgage for up to three months, and then your payments resume, either as usual, or at a higher amount to cover the missed payments.
You’ll need to discuss this request with your mortgage provider first, as breaks are given on a case-by-case basis; they won’t be automatically granted. If you have already failed to make any mortgage payments and fallen behind on payments, this may not be the best course of action for you.
It’s worth stressing that mortgage holidays are only a temporary, emergency form of financial relief. It’s vital to weigh up carefully how you’ll get back to making future payments if you decide to pursue a payment holiday of any kind.
Following advice from industry regulator the Financial Conduct Authority, banks have been advised to offer consumers the option of an interest-free overdraft of up to £500.
This may be a way of getting your hands on some quick cash to tide you over in an emergency, but it’s worth remembering that this isn’t free money. You’ll need to pay it back, and it’s only interest-free for three months, so consider carefully if you really need it.
More time for struggling renters
If you’re worried about paying your rent because of the COVID-19 crisis, it’s reassuring to know that you won’t be evicted. At the outset of the crisis, First Minister Nicola Sturgeon announced that “no-one should become homeless because of rent arrears.”
The Coronavirus (Scotland) Act 2020 has now been brought into force, bringing extra protection for renters in Scotland. The key difference in legislation is that landlords now have to give their tenants six months’ rather than three months’ notice if they intend to start eviction proceedings. This rule applies to both private and council rented properties.
What’s more, the Scottish Government website states, “We expect landlords to be flexible with tenants facing financial hardship and signpost them to the sources of financial support available.”
Bearing this in mind, it’s a good idea to let your landlord know if you think you could struggle to make payments, now, or in the future. In most cases, they’ll appreciate you taking the time to be honest and upfront about your situation and may even be able to offer help.
If you’re worried about the money you already owe to creditors, or you’re losing sleep over debt, you can speak to a member of the Carrington Dean team for free debt advice. Just ring 0808 253 3461 and one of our friendly, expert money advisors will be happy to talk things through.
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