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What to do when your coronavirus payday loan payment holiday has ended

If you took out a payday loan payment holiday because of coronavirus and it has now ended, it’s a good idea to get on top of the options available to you, especially if you’ve suffered a drop in income.

What is a payday loan?

These are expensive, short-term loans that were originally designed to tide you over until payday, hence the name.

The money is paid directly into your bank account. You repay in full with interest and charges – at payday – or at the end of the month if you’re paid weekly or irregularly.

Usually, you can only borrow for up to three months, and the amount you can borrow will be relatively small – up to around £1,000.

Interest and charges will be much higher than on a personal loan from a high-street bank.

But ‘Total Cost Cap’ rules set out by the Financial Conduct Authority (FCA) mean that you never have to pay back more than double the initial amount you borrowed.

What was a payday loan payment holiday?

If you were struggling to make loan payments because of the financial impact of the coronavirus, you were able to apply for one month payment holiday on your payday loan. You will not have been charged additional interest or charges

Taking the payment holiday won’t have had an impact on your credit report, but missing future payments will. However, you should remember that your credit report isn’t the only thing future lenders will use to decide whether or not to lend to you.

If you didn’t ask your payday lender for a payment holiday, your agreement will have been expected to continue as normal.

If you took out a payday loan payment holiday because of coronavirus it likely will now have ended or be coming to an end.

What happens when your payday loan payment holiday is over?

Repayments will restart automatically after your payment holiday ends, but your lender should have contacted you during the payment holiday to confirm you can afford to meet these repayments.

The payments you’ve missed will be added to your balance. This means your regular repayment amounts can go up when your payment holiday ends to cover the missed payments.

Our Budget Planner helps you see if it’s possible to cut back on costs and free up some extra cash to cover this additional cost.

Next steps if your income has dropped or you’re worried about making repayments

The coronavirus outbreak will affect many people’s finances, especially those who have been made redundant, placed on furlough or who have lost self-employment income.

If your income has dropped or you’re worried about making repayments, discuss your situation with your payday lender as soon as you can and before your next payment is due.

They’ll be more willing and able to help if you’re proactive and explain your situation.

Make sure you’ve claimed everything you’re entitled to

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Make an emergency budget

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If you’re worried about cashflow, have a look at what you’re spending and what income you have coming in, our Budget Planner will help you do this.

Look at how to cut your household bills, such as switching providers for your gas, electricity or mobile phone contracts.

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What’s the best way to contact my payday lender?

Phone lines are very busy now. If you can’t get through, try emailing them or using online contact forms to put your query in writing. This might provide useful evidence later if a problem escalates.

What should I say to my payday lender?

You might feel nervous or embarrassed about asking for help, especially if you’ve never had to before. But lots of people are in the same situation, and firms are expecting calls from customers who have seen their income take a hit.

The sooner you get help, the sooner you can get back on track.

Think of the conversation as ongoing, rather than a one-off, until your finances are back on track.

What can my payday lender do to help?

If you continue to have money problems as a result of the coronavirus crisis, your lender must work with you to understand how you can make future payments. They can consider suspending, reducing, waiving or cancelling any further interest or charges. This could include allowing you to:

  • further defer your payments
  • make reduced or token payments.

You should consider applying for a reasonable period of time to allow you to recover from the financial impact of coronavirus, regardless of whether your account is in default or arrears.

What happens if I don’t contact my payday lender?

If you don’t contact them, payday lenders will normally follow this process:

  1. They might first ask you to get in touch by writing to you or calling.
  2. They’ll then usually issue you with a written ‘default notice’. This gives you an opportunity to arrange how to catch up with your missed payments.
  3. If you don’t deal with the debt, the loan will ‘default’ – this will usually be after two to three missed payments.
  4. Once the loan has ‘defaulted’, more interest and charges could be added – increasing what you owe.
  5. If you still haven’t responded to them, your lender might go to court to seek a County Court judgment (CCJ) (called a decree in Scotland). A CCJ gives your lender more options to enforce repayment of the debt. Bear in mind that these measures can seriously affect your ability to get credit with other lenders in the future.
  6. The debt might eventually be passed to a debt collection agency (also known as bailiffs or sheriff officers).

Next steps if I have missed a payment

If you’ve missed a payment, contact your lender to explain your situation. You should avoid taking out more credit unless you know you can afford to pay it back.

When to get debt advice

If you’ve already missed payments and are not able to come to an agreement with your lender, it’s best to get advice as soon you can, especially if you’ve got other debts as well.

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Looking for us? Now, we’re MoneyHelper

MoneyHelper is the new, easy way to get clear, free,
impartial help for all your money and pension choices.
Whatever your circumstances or plans, move forward with MoneyHelper.

Continue to website
Looking for us? Now, we’re MoneyHelper

MoneyHelper is the new, easy way to get clear, free,
impartial help for all your money and pension choices.
Whatever your circumstances or plans, move forward with MoneyHelper.

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