What should you know all about debt holidays?

The times are tough, especially after the onset of the dangerous pandemic, COVID -19. The world is crumbling itself in the dark air of uncertainty, and continuous lockdown as this virus spreads to kill people. It has covered the world over, and a respite to this grave human danger is nowhere around yet.

The making of vaccines will take around six months to one year to materialize. Till that time, the significant Governments in all countries are advising everyone to stay at home to contain its spread.

This total standstill of the economy has caused a loss of jobs for people, especially for daily wage earners. People do not have enough funds to meet even their daily essential needs, a cash crunch situation. Many people in the UK, along with jobs, have a credit card and other debt servicing to repay.

It is complicated for any person to manage their finances amid this lockdown period. As offices are not functioning well, with much work from home situations, this problem is only getting worse.

Britishers have reached the tipping point of consuming all their savings in this pandemic. All over England and other areas of the UK, people are devising means to tackle this temporary problem.

One of the perfect solutions to this problem is making use of debt repayment holidays with the help of th lending market. Any person struggling to take care of their finances during this COVID-19 economic shut down can make use of easy money loans.

These loans are accessible via online means and are applicable for a short duration. Once an application is made on the website, an agent of the lender will visit the house of the borrower to complete other loan formalities.

After this, the entire loan amount is credited to the borrower’s bank account within a few hours or the same day.

What are debt repayment holidays?

Debt repayment holidays are temporary relief measures granted to loan borrowers in the wake of any financial crises.

Any person struck in a bad situation of not being able to service the debt repayments timely can request for its holiday. By holiday, the meaning is to defer the monthly instalment repayments or a reduction in the total loan amount.

Till the time the borrower regains his earnings and starts timely repayments, this gets the approval.

It is just a short term temporary relief. Application for Debt repayment holidays is made provided all the other creditors also agree for the same. Further, the borrowers should have paid the first monthly repayment instalment.

The lending companies will only grant permission for this holiday after considering various aspects. Majorly they take into account the borrower’s credit history.

If a person has a long history of defaults in repayments, then the chances of this application approval are nil as such persons will fall into the danger zone of nil loan repayments.

Additionally, the lenders will also ensure that all the other mortgagees have also agreed for such a repayment holiday.

Mortgage repayment holiday

Anyone seeking a break from the servicing mortgage debt can make the application. Once this is accepted, considering the dangerous situation, a debt holiday time up to six months can be granted.

You can also make an application to reduce the whole loan amount to its half depending upon the type of mortgage, credit score, and time of the loan.

Impact of debt repayment holidays

The impact of this debt repayment holiday is that:

• The duration of the entire loan will get extended, till the time granted by the lenders,
• Higher interest payments will have to be made, in the form of accruals,
• The credit score is not affected at all.

On the 9th April 2020, the FCA announced temporary relief for debt and overdraft repayments as under people have the option to apply for a three-month freeze on loan and credit card debt repayments.

Besides, by loans, the following types of loan products: 

• Guarantor loans,
• Logbook loans,
• Home collected credit,
• A loan issued by Community Development Finance Institution (CDFI), and
• Regulated loans issued by credit unions.

Apart from that, some reputed online lenders grant no guarantor loans to anyone. People unable to provide any help for co-signing the loan agreement guaranteeing its full repayment can use these loans smartly.

No stipulation for any guarantee or even collateral, these are just boons of easy loan options.

Olsen Breet

Olsen Breet is our in-house Financial Expert at EasyPolicyLoans, with more than a decade of writing for various finance companies in the UK. He has got this knack for turning even the trickiest money matters into something we can get our heads around. Before he started sharing his wisdom here, Olsen was playing with big numbers and advising on loans at a bank. He graduated from University of Glasgow, grabbing a finance degree before jumping into the deep end of the financial pool. Olsen’s our go-to guy for making sense of market trends and is always ahead of the curve.