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If you can’t repay a loan or something you bought on finance because of coronavirus

This advice applies to Scotland

You can get help if coronavirus has made it difficult for you to:

  • repay a loan
  • pay for something you bought on finance - for example, a car or something for your home like a washing machine or furniture

You might be able to get your payments reduced or paused. You might also be able to stop something you bought on finance from being repossessed.

Your lender or finance company should work with you to stop your debts from getting worse.

If you can’t repay a loan from a Credit Union

Contact the Credit Union – they should help you deal with your repayments. For example they might offer to:

  • reduce or pause your payments for a limited time
  • stop adding interest to the loan for a limited time 
  • help you work out a plan to pay what you owe

Getting your payments reduced or paused

At the moment, lenders and finance companies are expected to agree to reduce or pause your payments for a limited time if you can’t pay because of coronavirus. This is called a ‘payment deferral’. If you have a guarantor, the lender shouldn’t try to get money from them during this time.

A payment deferral won’t help you pay off the money you owe. It’s usually not a good idea to ask for a payment deferral if either:

  • you were already struggling to repay your loan before coronavirus

  • you don’t think you’ll be in a better position to pay at the end of the deferral

If you get a payment deferral, it won't affect your credit score. It might make it harder to get credit in the future, as some lenders can look at other things - for example, bank statements.

Talk to an adviser if you’re not sure whether to ask for a payment deferral or you want to check other ways to repay your loan.

If you want a payment deferral

You should ask for a deferral before 31 March 2021. After this date, you won’t be able to get a deferral.

Check the website of your lender or finance company to find out how to ask for a deferral.

If you can, keep making your payments until they agree to reduce or pause them.

A payment deferral can last up to:

  • 1 month for payday loans
  • 3 months for something you’ve bought on finance 
  • 3 months for a loan from a pawnbroker – this mean they’ll wait 3 months before they sell your things
  • 3 months for a student loan you got before 1998 – you can’t get a deferral for a student loan you got in or after 1998
  • 3 months for most other types of loan

You can find out more about payment deferrals on the Financial Conduct Authority (FCA) website.

If you need a second payment deferral 

You should ask for a second deferral before 31 March 2021. After this date, you can only get a second deferral if you ask for it before your first deferral ends.

You won’t get a second deferral for payday loans.

You can't defer payments for more than six months in total.

If you ask your lender for a second deferral, it can either:

  • run straight on after the first one ends

  • have a break in between

If you ask to extend your payment deferral after 31 March 2021, it has to carry on from your existing payment deferral. You won’t be able to extend your deferral past 31 July 2021. 

You’ll need to make up the payments you miss during a payment deferral – the lender or finance company might also charge you interest. This means after the payment deferral you’ll have to either:

  • pay more each month
  • keep making payments for longer

When the payment deferral ends, the lender or finance company should help you work out a plan to pay what you owe. This includes if you have to pay a final large payment to own a car.

If you can’t get a deferral

You could ask your lender or finance company to look at other options to help you - for example, they might be able to:

  • reduce or not charge interest on your arrears 
  • be flexible with the amount you have to pay back and how long you have to pay it
  • allow you to pay a small amount or nothing for a fixed amount of time
  • make a payment plan 

Your lender should give you time to consider the best option for you. They should pause your account for 30 days if you’re waiting for your circumstances to change - for example, if you’re waiting for benefits or you’ve just returned to work after being furloughed. If you need more time after the 30 days, you should ask your lender.

If your lender pauses your account, it’s a good idea to use this time to get debt advice. You can talk to an adviser for help. 

If your lender pauses your account, it’s a good idea to use this time to get debt advice. You can talk to an adviser for help.

If you’re considering a refinance agreement, you should think carefully about whether you can afford the monthly payments - you can work out your budget to check if the payments are affordable for you.  

If you get a letter saying you’re in arrears

If you get a payment deferral, your lender or finance company might still send you letters saying you’re in arrears.

If this is the first time you’ve had a letter about arrears, you shouldn’t have to do anything about it - but it’s a good idea to contact the company to make sure.

If you were already getting letters about arrears before the payment deferral, you’ll still need to deal with these. Make sure you’ve read what the letter says you should do. You can also check our advice on dealing with your debts.

If you’re struggling to pay your credit card bills 

You can check what to do if you’re struggling to pay your credit card bills because of coronavirus. 

If you get a payment deferral for a car

You might still have to pay for other things during your payment deferral - for example, your: 

  • MOT
  • road tax
  • insurance
  • breakdown cover

If you extend the term of your loan, you might have to extend or renew these things.

If your lender wants to repossess your car or goods

Your lender should only repossess something if they can’t get the money back another way.

If you’ve missed payments for something but you want to keep it, contact your lender and ask to make a repayment plan. If they agree, a repayment plan will mean you can pay smaller amounts over a longer period of time. 

Make sure you tell your lender if you’re in a difficult situation - for example, if you’ve lost your job because of coronavirus. They might decide not to repossess something if it would make your situation worse.

Talk to an adviser if your lender tries to repossess something and you think it’s unfair - for example, if they’ve refused to make a repayment plan.

If your lender decides to repossess your car or goods

Your lender should keep you up to date about their plan for repossessing your goods. They should also explain how delaying the repossession would affect your situation - for example, it’s likely to increase the debt you owe. 

If you feel your lender hasn’t kept you up to date, you can complain to an ombudsman.

You can find out what happens when your lender repossesses something.

If you’re delayed in giving something back because of coronavirus

Your lender should work with you to find a solution if you’re delayed because of coronavirus. For example, your lender might ask you to stop using the vehicle. 

If you’re delayed in collecting goods from a pawn brokers 

Pawn brokers shouldn’t charge you any extra interest if you’re delayed because of coronavirus. 

If your lender wants to change your agreement

They need to get your permission before they make any changes. 

They might try to give you a worse deal. For example, they might say the car you bought on finance has gone down in value and you need to pay more to make up for it.

Check if you’ll be worse off before you agree to any changes.

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