Extending holidays for repaying loans and credit cards for another three months

The Financial Conduct Authority confirmed that credit card and personal loan borrowers will be able to freeze their payments for another three months.

However, the city’s watchdog said those who can afford to make reduced payments should do so.

Borrowers who have not yet placed a payment freeze, along with those who have not yet applied for an interest-free overdraft of £500 from their bank, have until the end of October to apply for one.

The announcement comes in line with moves taken to extend the mortgage holidays for another three months, which were announced at the end of May.

Credit card and loan borrowers will have until October 31 to request a hold on payments, and can take a break of up to six months.

Credit card and loan borrowers will have until October 31 to request a hold on payments, and can take a break of up to six months.

The Financial Conduct Authority (FCA) earlier introduced rules on overdrafts, credit cards and personal loan borrowers in April, with three months of paid vacations taken by more than 1.65 million people by the end of last month.

There has reportedly been controversy over providing another blanket three-month payment holiday for unsecured borrowers who have been hit hard by the coronavirus crisis, due to the cost of accruing interest, especially on credit cards.

That’s the money we previously found that taking three months’ paid leave on a credit card with an annual interest rate of 29.9 per cent and a balance of £4,000 would see £270 of interest added over the break.

The Financial Conduct Authority (FCA) made it clear in its announcement that it wants borrowers to make reduced payments where they can rather than simply suspend their payments for another three months.

It said banks should contact customers at the end of the three-month payment freeze period to see if they can resume payments and agree on a payment plan if they can.

“Where consumers can make payments, it’s in their long-term interest to do so, but for those who need help it will be there,” said interim CEO Chris Woolard.

Could a Three-Month Credit Card Vacation Vacation Cost You More?
current card balance April Minimum due each month before vacation Minimum due after vacation Interest added during the holiday Additional interest estimated per year
£1,000 18.9% £25 £26 £44 £10
£1,000 21.9% £27 £28 £51 £14
£1,000 29.9% £32 £34 £68 £22
£4,000 18.9% £98 £103 £177 £42
£4,000 21.9% £107 £112 £203 £56
£4,000 29.9% £128 £137 £270 £89
Source: Barclaycard / Santander

Richard Lane, director of policy at StepChange Debt Charity, said the announcement was a ‘huge relief’ but called for more support by those whose finances have been hit hardest by the coronavirus pandemic.

Unless more long-term support measures are put in place, this relief will not last long.

Our research has found that 4.2 million people have borrowed to make ends meet since lockdown began, stockpiling a £6 billion tsunami of debt that is set to get worse if left unchecked.

“With many households wondering how to catch up on deferred payments, the FCA must not allow payment holidays to end with a debt brink.

The FCA’s announcement regarding the overdraft also contains a potential bite in the tail for those unaffected by the coronavirus.

All banks scrapped changes that would have households paying interest rates of 35 percent or more to borrow, with some waiving fees altogether and almost setting lower interest rates.

Could high overdraft fees wait for borrowers after they exceed the fee-exempt reserve limits after a temporary deferment?

Could high overdraft fees wait for borrowers after they exceed the fee-exempt reserve limits after a temporary deferment?

However, for those whose finances are not in jeopardy due to the virus, higher overdraft rates could soon come.

The FCA said: ‘In April, we set a temporary general expectation across the market that firms should ensure that all overdraft customers are no worse off in terms of price than the rates charged before the recent changes to the overdraft rule took effect. exposed into effect.

The FCA is not proposing to extend this temporary measure across the market.

However, overdraft customers affected financially by coronavirus will continue to require a reduced rate of interest on any additional loans over £500.

The FCA will continue to monitor overdraft rates.

The Bank of England found that the average overdraft cost fell 15 percentage points in April to 10.93 percent.

This was after banks backtracked on plans to set overdraft rates at nearly 40 percent of the annual interest rate.

Andrew Hager, founder of personal finance site Moneycomms, said: ‘It will be interesting how banks decide which customers are financially impacted by coronavirus – perhaps if you’re proactive and apply for a lower rate you’ll consider it but if you don’t, it’s going to be an issue. Hence there may be a risk that the bank will return borrowers to its standard rate.

“Communication must be crystal clear from banks to ensure that eager customers are not denied.”

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