If you can’t repay a loan or something you bought on finance because of coronavirus
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.
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 might make it harder to get credit in the future, for example a loan.
Contact your nearest Citizens Advice 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
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
If you’re still struggling at the end of the deferral, you can ask for a second payment deferral of up to 3 months until 31 October. You won’t get a second deferral for payday loans.
If you still need help after deferring your student loan payments, you can ask for a 12 month deferral. It might take a while to arrange this – you’ll need to show you have a low income.
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 provider to look at other options to help you - for example, they might be able to:
offer you a refinance agreement - for example, you could take out a loan to pay off your current loan and arrears
be flexible with the amount you have to pay back and how long you have to pay it
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 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 get a payment deferral for a car
You might have to pay for other things - for example, if you need to extend or renew your:
- road tax
- breakdown cover
If your lender wants to repossess your car or goods
Tell your lender why you need your car or goods. They shouldn’t repossess anything you need until 31 October 2020, if:
- your lender has paused your payments for up to 3 months - this is called a 'deferral period’
- they haven’t explored other options first - for example, helping you to make a payment plan
They shouldn't repossess your essential items after 31 October if you can’t replace it because you’re:
- in an area at high or very high alert - this is also known as 'tier 2' or 'tier 3'
Your lender should keep you up to date about their plan for repossessing your goods. They should also explain how delaying the repossession will 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.
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.
Before you let them change the agreement, contact your nearest Citizens Advice for help.