The pros and cons when it comes to payment holidays
As we approach a year of lockdown and life-changing measures to combat Covid, more people than ever are contacting me to ask about how to sort out their debts.
With new measures in the budget to help many people through the next few months, there’s never been a better time to tackle debt.
Yet research from Resolver reveals many people were confused by the options available – and by ‘payment holidays’ in particular.
What is a payment holiday?
To help people face the financial challenges posed by the pandemic, the regulator for all things moneyrelated, the Financial Conduct Authority (FCA) – introduced clear rules for lenders so they could offer people ‘holidays’ from mortgage, loan, car finance, credit and other financial debts.
This means you can potentially get a ‘holiday’ from your financial obligations for a total of six months – though this is only available in three-month chunks.
While this temporary relief from financial commitments has been broadly welcomed, over a third of the people Resolver surveyed did not realise that financial businesses were allowed to charge interest on the outstanding balances or when this would be payable.
Furthermore, a third of people who’d taken a payment holiday did not realise this either. This matters because, if you take a payment holiday, you may have to pay more money over a longer period.
How many people are affected?
The survey also revealed that many had struggled in the last year.
A fifth of people had been forced to use their overdraft facility in 2020 – with half of those straying over £500 and finding that they’re being charged high overdraft interest as a result. More than a third of people told us they were worried about repaying their debts.
Worryingly, large numbers of people have told me that when the payment holiday finished, the lenders were less than helpful about the options available.
How can I tackle my debts?
Don’t be disheartened. There are lots of things you can do for free to tackle your debts. I’d suggest:
■ Set aside a morning or afternoon: Sometimes the process of dealing with debt can make you feel better about what you owe. Take your time and have a few breaks while you do it, though.
■ Do a mini budget: Work out what money you’ve got coming in and what your outgoings are. Go through your bank, credit card and mobile phone statements and cancel anything you don’t need. If you haven’t authorised payments you can seek a refund too.
■ Contact businesses ‘off-peak’: Lots of people tell me they’re waiting a while to get help on the phone. There’s no way around this one, I’m afraid. But try to call mid-morning, mid-afternoon or early evening if the helpline is open later. ■ Have your details handy: Explain to the business your current cashflow and work situation. Ask them to provide solutions tailored to your situation and confirm in writing what they are. If they don’t help, tell them you’ll be going to the (free) Financial Ombudsman.
What if I’m in difficulties?
If you’re really struggling to get help or are finding it all a bit much, free debt charity StepChange can help you with your creditors. Never pay a debt management service, no matter what they promise you.
There are a number of Government rules in place to prevent businesses taking action against you in terms of legal action and debt recovery, depending on the type of lending you have and which country in the UK you live in.
There are also separate rules relating to rent and people in arrears. Needless to say, if you are in arrears with your rent, it’s vital that you seek help without delay.
Check out the gov.uk website (type in ‘help with rent’ to get the Government guidance in full).
Resolver can help you with any complaint you have about money and debt. Go to resolver.co.uk
Having trouble resisting the temptation to eat something sweet at the moment?
“Sweet cravings can occur as a result of hormonal changes triggered by reduced light levels in winter,” says GP Dr Sarah Brewer.
“One theory is that sweet or carbohydrate cravings are a form of self-medication that stimulates secretion of the brain chemical serotonin, which lifts our mood.”
Control food cravings by increasing your intake of healthy carbs such as wholegrain bread, porridge, brown rice, pearl barley, oatcakes, unsalted nuts and seeds.
Exercise also burns off calories.