PAYDAY and short- and medium-term loan borrowers struggling with repayments due to coronavirus should contact their lender as soon as possible.
These lenders don’t have a blanket method of helping customers, such as offering three-month repayment holidays as we’ve seen banks do with mortgages.
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But they can offer help on a case by case situation.
Graham O’Malley, debt expert at Citizens Advice, told The Sun: “All firms, including payday lenders, are expected to treat their customers fairly.
“This means they have to consider your circumstances, such as if you’re unable to work because of Covid-19, and try to help you.
“This could include offering you more time to pay, a breathing space during which you won’t need to make payments, or stopping adding interest to the debt.
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“If you have a payday loan and are struggling to make repayments, you should contact the firm and ask what they will be able to do to help.
“If you’re still worried, contact Citizens Advice for free, impartial and confidential advice.”
What help can my payday lender offer?
According to the Financial Conduct Authority (FCA), which regulates high cost credit firms, there are a number of different options lenders can offer to struggling borrowers.
They can suspend, reduce, waive or cancel further interest or charges.
Alternatively, they could defer payments as long as this doesn’t increase repayments to an unsustainable level or shorten the term of the loan to make repayments excessive.
Another option is for lenders to accept token payments for a “reasonable” period of time if repayments at their current rate mean borrowers can’t meet priority debts or pay their rent, bills or buy food.
The Sun has reached out to numerous short-term and medium-term high cost lenders to find out their policies.
Here’s what we’ve been told so far:
- 118 118 Money: Customers who get in touch to advise of difficulties due to coronavirus will have their account put on hold for 30 days. It will then come back to borrowers during this time frame to discuss an affordable repayment plan. It does not charge any late payment fees.
- Amigo: It would only tell us that customers should get in touch as help differs depending on your situation.
- Loan Pig: Can offer repayment holidays and/ or reduced payment schedules without adding further interest or financial penalties. Exactly what is offered will vary depending on the customer but in the past it’s offered up to four month repayment holidays.
- Mr Lender: Can freeze future payments, spread repayments over a longer term to reduce monthly payments, or offer breathing space from repayments. It added that it never applies fees or charges for late repayments.
Sadly, many lenders don’t have advice on their websites about the help being offered to borrowers during the coronavirus epidemic.
So you’ll need to get in touch to ask.
Sara Williams of debt blog Debt Camel said: “Most lenders are saying get in touch if you have problems because of coronavirus – but they aren’t being clear about what help they will offer.
“In these difficult times, payday lenders should be more open and say that people can have payment holidays if they need them and that this won’t affect people’s credit records.”
Industry trade bodies, the Consumer Finance Association (CFA) and the Finance and Leasing Association (FLA), say members will look at all the options to help borrowers.
The CFA adds that lenders are moving more staff onto phone lines to help with the increase in calls.
Will this affect my credit score?
Where a repayment holiday is agreed as a result of coronavirus, the UK’s three credit reference agencies – Equifax, Experian and TransUnion – say it won’t impact your credit score as they’ll implement an “emergency payment freeze”.
This means it won’t be recorded on your file.
It also applies to other measures such as reduced payments, paused payments, or increased credit limits.
Have payday lenders stopped giving out new loans?
Yes, some payday and medium term lenders have stopped giving out loans to new borrowers due to the coronavirus.
These include Amigo, Drafty, and Everyday Loans.
Where can I turn to if I need help?
If you’re struggling you should get free advice from charities such as Citizens Advice, National Debtline, and StepChange.
We’ve also rounded-up the banks that are giving mortgage holidays and bigger overdrafts if you’re struggling due to coronavirus.
Plus, here’s how to get help paying bills.
