Martin Lewis: Payment holidays coming to an end – but should you take one? Mortgages, credit cards, loans, payday loans, car finance and more

The last time to apply for automatic pay holidays is 31 March 2021

There's a whole range of payment holidays and all have had their deadlines move.  Now most end at the same time, 31 March 2021. There are still help-provisions available after that but they're far less certain and weaker.  So let me take you through each product. .

• Mortgages. Blanket mortgage payment holidays for everyone are due to end on 31 March 2021. Apply by then and most people can get a new three month payment holiday. If you’ve already had one, you can also 'top-up’ but the longest total is six months.
  
  If the payment holiday you are currently on is due to end after 31 March, you should be able to extend it up to a maximum of six months, though all payment holidays now must end by 31 July 2021.  So, apply now for the first time, and you won’t be able to get the full six months’ worth of help - as that'd take you beyond that July date. These payment holidays won't appear on your credit file. 
  
  To show the impact of taking a mortgage payment holiday, someone paying £600/month on a mortgage with a 12-year term remaining who takes a three-month holiday will typically have 11 years nine months to repay at a higher £616/month.
  
  The shorter the remaining term, the bigger the impact – with little time left, it can be a huge jump. To see the likely impact on yours, use a Mortgage Payment Holiday Calculator.
  
  Already taken a six month mortgage payment holiday?
  
  If you’re still struggling you lender should offer ‘tailored support’ (this could be a payment holiday, or lower payment, or interest or other help) though do be aware unlike standard payment holidays this WILL appear on your credit report. 
  
  
• Credit card and loan holidays. Payment holidays for credit cards, personal loans and catalogue debt are also due to end on 31 March 2021.  Apply by then and most people can get a new three month payment holiday. If you’ve already had one, you can also 'top-up’ but the longest total is six months.
  
  If the payment holiday you are currently on is due to end after 31 March, you should be able to extend it up to a maximum of six months, though all payment holidays now must end by 31 July 2021.  So, apply now for the first time, and you won’t be able to get the full six months’ worth of help - as that'd take you beyond that July date. These payment holidays won't appear on your credit file. 
  
  Already taken a six month mortgage payment holiday?
  
  If you’re still struggling you lender should offer ‘tailored support’ (this could be a payment holiday, or lower payment, or interest or other help) though do be aware unlike standard payment holidays this WILL appear on your credit report.
  
  Be especially careful with credit card payment holidays.
  
  I'm more concerned about people taking these than mortgage holidays, because the interest is usually higher, so missing payments is worse. If you can, do use our 0% Balance Transfer Eligibility Calculator to see if you can shift your debt to a cheaper card before doing a payment holiday, as then no interest would be racking up.
  
  If not, if you could take a mortgage holiday and use the money to pay off your credit cards, for most that's likely to be a better route. Just ensure that, when you can, you overpay the mortgage to make up for it – otherwise you'd be spreading the cost over a long period, which could be expensive (the relative impact of each action on future applications is still unknown, but it is worth being aware that it's possible mortgage payment holidays could be seen as more substantial).
  
  
• Overdraft help. At the start of the coronavirus pandemic, the regulator instructed banks to give everyone struggling up to the first £500 of their overdraft interest-free. This was extended till October 2020. Though unlike other help, this wasn’t extended again.
  
  Only one bank – Santander – is still, voluntarily, offering the up-to-£500 interest-free buffer for three months to give respite against what are now standard 40%-ish interest rates. If you're not with Santander, then call your bank. It should provide those who are struggling with ‘tailored support’ designed to meet your needs.
  
  Overdrafts are a new big danger debt
  
  The background to this is worrying.  In April 2020, after a regulatory change, almost all banks' overdraft rates were set to be a hideous 40% APR – double a high-street credit card, making overdrafts the new danger debt (see my 40% overdrafts warning from the time) - while this was suspended for a while - it is now back on.
  
  This means overdrafts are one of the most expensive forms of mainstream borrowing possible.  Double the rate of a typical high street credit card.  For more help see our 10 tips to reduce my overdraft guide.
  
  
• Car finance, pawnbroking and buy-now-pay-later holidays. Payment holidays for car finance, pawnbroking, buy-now-pay-later and rent-to-own are due to come to an end on 31 March 2021.
  
  So if you've a car loan, PCP, leasing or HP deal and are struggling to pay due to coronavirus, apply soon and you can get a new three-month payment holiday. Or, like the measures above, if you're on your first payment holiday and it ends after 31 March, you'll be able to extend it for another three months, though it must end by 31 July. These holidays won't affect your credit file.
  
  Alternatively, your lender will also be able to reduce your monthly payments to an affordable level for three months or you can ask for a partial payment holiday. It also means they shouldn't repossess your car if you're on a payment holiday. 
  
  The payment holidays also apply to pawnbroking, buy-now-pay-later and rent-to-own. For more info on all of these see car finance, pawnbroking, buy-now-pay-later and rent-to-own.
  
  
• Payday loan payment and interest holidays. As with car finance above, payday loan payment holidays will come to an end for everyone on 31 March. Uniquely, those struggling due to the financial impact of coronavirus can apply for a one-month payment and interest holiday before then, which frankly is a no-brainer. This WON’T go on your credit file. 
  
  But unlike other products, if you're already on a payment holiday, you won't be able to ask to extend it. Instead, the lender may offer help in a different way. For example, the lender can accept token payments, agree a repayment plan, or reduce or waive interest while the customer repays.
  
  As a side note, many have been missold payday loans if so you may be able to reclaim.
  
  
• Home and car insurance monthly payments. If you pay car or home insurance monthly, it's actually a loan – they loan you the annual cost of the insurance and charge you interest on top (far better to avoid this if you can). 
  
  If you're struggling to pay monthly premiums, whilst there’s no official three month payment holiday for all, the insurer should look at offering tailored help, for example, it could include a short term payment deferral, or forbearance.  Though this help will be noted on your credit file. It should reassess the level of cover you need and remove unneeded extras to bring the premium down.
  
  
• Individual voluntary arrangement payment holidays due to end April 2021. This isn't imposed by the FCA – instead it's down to the Insolvency Service. If you've an individual voluntary arrangement (IVA) – which is a debt management solution – you have until 20 April 2021 to ask your supervisor directly to approve up to an extra three months of payment breaks. (Usually, your supervisor needs to ask your creditors first, which can be a slow process, and normally you can take up to nine months during the term of the IVA.) 
  
  Your IVA supervisor can also approve up to six months of payment breaks, and approve a reduction in your monthly payments by up to 50% (it was 25% previously, the standard variation is 15%). If you take a payment break, the extra months will be added to the end of your IVA term, so it may last longer than the standard five years in your case.