The Coronavirus pandemic has brought about financial upheaval and distress for millions of individuals and businesses, leaving everyone feeling concerned and uncertain over their finances.
With people having been furloughed or made redundant during these difficult and unprecedented times, it is no wonder that millions of people in the UK are looking for help and turning to debt advice organisations or government schemes in order to get support.
StepChange, a debt charity that offers free expert advice and provides solutions for those who may be struggling with their finances, reported that the latter part of March 2020 saw their busiest days in history - even more than what they experienced during the financial crisis in the mid-2000s.
The 5 most common financial concerns & worries
StepChange was asked by thisismoney.co.uk what people’s main concerns are and what questions are currently being asked the most regarding debt and finances.
The debt advice coordinator from StepChange, Andy Shaw, gave the top 5 most commonly asked questions and thankfully, provided answers to help the nation, which we will look at in this article.
1. What can I do if I can’t pay my credit card/overdraft/personal loan this month?
Mr Shaw’s response to this was that, where possible, consumers should carry on paying their monthly payments if they are able to. However, the Financial Conduct Authority (FCA) recently proposed that banks and lenders should do their utmost to provide help and support to their customers who have any credit cards, overdrafts or loans with them.
Such support will allow people to apply for a moratorium (temporary relief) at any time if they have debt issues due to the coronavirus, but StepChange recommends that you receive debt advice first before doing so.
It is important to remember that a moratorium does not put a hold on any interest or other fees you may be paying on top - it simply prevents court enforcement action, so be prepared for your future repayments to be slightly higher to account for the interest and charges you didn’t pay during the relief period.
For people living in Scotland, the moratorium period has been extended to help people who are in debt from 6 weeks to 6 months, and the rule of ‘one moratorium period per year’ has also been relaxed for the time being.
Within this period, lenders and creditors are not allowed to take action against you for not paying off the debt.
2. I was sent a letter earlier this year about my persistent credit card debt - will I still need to increase my payments?
The term ‘persistent debt’ is used to refer to a consumer who is currently paying back more in interest, fees and charges compared to the amount they’ve actually borrowed on their credit card over 18 months.
Previously, those in persistent debt were sent letters by their lenders, asking them to increase their repayments, and customers were expected to respond to these letters. However, due to current circumstances, the date by which people must reply to such communications has been extended to 1st October 2020.
Borrowers have also been allowed more time to increase their payments on any persistent debt currently owing, thanks to the FCA (Financial Conduct Authority) relaxing rules.
3. Will my credit score be affected if I take a payment holiday?
It commonly known that doing things such as failing to make a repayment on your loan or mortgage can have a negative impact on your credit score and report.
However, it has been confirmed by the UK’s credit reference agencies (CRAs) that taking a payment break (or holiday) as provided by your lender during the coronavirus crisis will not affect your credit rating - providing that you have kept up with any loan repayments so far.
People who are in arrears with their loan or mortgage will need to contact their lender(s) to enquire how they will report your payment holiday to the CRAs and, therefore, whether or not it will cause your credit score to be affected.
It’s important to check your credit score regularly and be aware of financial decisions that could affect it badly, as this will make it more difficult for you to take out loans and borrow money from creditors again in the future.
4. Can I apply for a payment holiday if I’m currently on a debt management plan (DMP) or Individual Voluntary Arrangement (IVA)?
As with any monthly payments you may have, StepChange encourages you to keep paying them if you can afford to do so while on a DMP or IVA.
Understandably, not everyone will be in a position to do so due to the coronavirus outbreak, and many may be worried about this.
Similar to his replies above, Mr Shaw advises that you get in touch with your DMP or IVA provider to explain your circumstances if you have been significantly affected by Covid-19.
He says that StepChange will try to reduce and alter debtors’ payments in-line with their current, individual case.
Those who are going to contact their IVA provider will need to provide proof including the details of your earnings and expenses if your situation has changed due to the coronavirus.
5. What help is available if I can’t pay my utility bills?
If you’ve been financially hit due to the coronavirus pandemic and you’re finding it difficult to keep up with gas, electric and/or water bills, the first thing you should do is contact your energy supplier to inform them of your situation. They will be understanding and able to walk you through the options available to you.
Depending on your supplier, there is a range of other ways in which you may be able to get help with them, with grants and financial schemes, for example.
It is also worth looking into signing up with an automated energy switching company, like Look After My Bills, who will scour the market to find you a cheaper deal and will only switch your supplier if they can save you £50 or more per year. Plus, you don’t have to do anything yourself - they sort it all out for you.
Andy Shaw continues to inform us that those with pre-payment meters may be able to get help from food banks, which may give you a top-up if you’re out of credit.
He also says that water, gas and electricity are priority bills and must be paid, otherwise your supplier could cancel your supply altogether - so be sure to get in touch with your supplier straight away if you are concerned.
Concerned about debt or being unable to make payments? - Get help now
As well as the debt advice organisation StepChange, millions of people also turn to Citizen’s Advice for help and information regarding coronavirus and debt.
Similarly to the advice provided by Andy Shaw, Citizen’s advice also state that it’s important to keep up with bills and not to ignore them, and to get in touch with the provider you owe money to, including your bank or building society.
If you haven’t already, look into the help offered by the government for workers - both employed and self-employed. You can find out more information in our guide: Can I get financial help if I am affected by Coronavirus?
At Bobatoo, we advise that you follow the advice given by debt experts like those at StepChange and Citizen's advice to make sure you’re keeping on top of your situation and don’t make it worse.
For further information, read our related guides below: