Advice for Extending Your Car Finance Payment Holiday

man worried about extending his car finance holiday

The COVID-19 pandemic has put financial stress on millions of Brits across the country, with unemployment benefit claims recently jumping to the highest levels in more than 20 years. As a result, the Financial Conduct Authority (FCA) has been rolling out a wave of relief packages, including payment holidays on car finance.

The scheme kicked off in March and was recently extended until October 31, offering Brits the option to defer more than six months’ worth of repayments. Read on for some advice on how the extended payment holiday works and whether you should take one.

Hugely popular scheme

As the name suggests, the car finance payment holiday allows you to take a break on payments for your car finance agreement. “If you’ve a car loan, PCP, leasing or HP deal and are struggling to pay due to coronavirus, you can get a new or extended three month payment holidays on request,” explains Martin Lewis, founder of consumer finance information website MoneySavingExpert. “They can’t repossess cars for non-payment until October 31.”

The latest data from lenders’ trade body UK Finance confirms the scheme has been hugely popular, with more than 1.9 million Brits taking advantage of payment holidays for mortgages alone. While the package is a blessing for Brits struggling to repay loans, experts stress caution should be used when deciding whether to apply for a car finance payment holiday.

A credit file footprint

The COVID-19 pandemic may have reimagined the lending landscape but that doesn’t mean your credit file will remain unaffected. While the Chancellor and FCA have confirmed car finance holidays won’t show up on your credit file, lenders can still find out if you’ve applied for deferrals and use this to negatively assess your application.

This can be done by sourcing information via a third party or looking for inconsistencies in your payment history. The FCA has confirmed this is legal and has even warned consumers about the potentially negative impacts of payment holidays. So, while a little relief in the short term is tempting, a payment holiday could impact your chances of securing loans in the future.

“If you NEED one, take it, but ONLY take it if you need it,” stresses Lewis.

Deferral, not holiday

While the scheme is marketed as a payment holiday this term can be deceiving. Holiday implies a carefree system where borrowers can forget about a payment. In reality, payments are simply deferred and can result in larger debts when the car finance holiday is over.

Factoring in interest

The option to defer payments will be hugely helpful for some. However, for those who can afford to continue paying, the advice is to do so. Excluding payday loan holidays, interest isn’t frozen and will continue to accumulate over the course of the car finance payment holiday.

Usually, repayments lower the total amount owed and gradually bring down the interest. By freezing payments you’re not lowering the total amount and as a result, interest starts to climb, and the loan will cost you more in the long run.

Car finance payment holidays have provided much-needed relief to many Brits during the COVID-19 pandemic but at the same time, they’ve also tempted many borrowers who don’t need assistance. Before applying, the best thing to do is crunch the numbers, talk to your lender and make an educated decision about whether a car finance holiday is the right decision for you. If you’re in trouble, the National Debtline is a fantastic resource.

How we can help

Whether you’re in need of a payment holiday or you’re looking to upgrade your car as things get back up and running, the team at My Car Credit is here to help. Get in touch with our team to discuss your requirements in more depth.

Rates from 9.9% APR. Representative APR 12.4%

Evolution Funding Ltd T/A My Car Credit

My Credit Rating

Excellent

  • You are a home owner
  • You have been on the electoral role for a long period of time
  • You have current credit arrangements and mortgage with no defaults
  • You have no CCJs, credit arrears or missed payments
  • You rarely apply for credit
  • You are employed or self-employed

Good

  • You are on the electoral role
  • You are a home owner or long standing tenant
  • You have a stable employment history
  • You have current credit arrangements with occasional missed payments
  • You have no CCJs

Fair

  • You are or have recently been on the electoral role
  • You may have recently changed address
  • You may have occasional missed payments
  • You may have an old CCJ
  • You may have regularly applied for credit

Poor

  • You may have had frequent changes in address
  • You may not be traceable on the voters roll
  • You may have exceeded credit card limits
  • You may have missed payments on current agreements
  • You may have had a CCJ in the past

Bad

  • You may not be traceable on the voters roll
  • Your credit cards are over their limits
  • You have recent CCJs
  • You may have been refused credit elsewhere
  • You may be in a debt management plan
£

X monthly repayments of
£X

Typical rate

Loan amount

Total payable

X% APR*

£X

£X

*for illustration purposes only

No impact on your credit score*

Representative Example

Borrowing £7,500 at a representative APR of 12.4%, annual interest rate (fixed) 12.36%, 47 monthly payments of £196.44 followed by 1 payment of £206.44 (incl. estimated £10 option to purchase fee), a deposit of £0.00, total cost of credit is £1,939.12, total amount payable is £9,439.12.

Evolution Funding Limited, trading as My Car Credit, is a credit broker and not a lender.

Please ensure you can afford the repayments for the duration of the loan before entering into a credit agreement.

*Initial application is a soft search. Should you progress, some lenders may perform a hard search on your credit file.

Require more help?

Got a question you can’t find the answer to, or need some advice and guidance around taking out car finance? Our Car Credit Specialists are friendly, experienced, and here to help so get in touch today!

Coronavirus Outbreak: Can I Get a Car Finance Payment Holiday?

Man with sleeves rolled up using his phone to check if he can get a payment holiday

Many households are having to endure significant changes to their personal finances in recent weeks due to the COVID-19 pandemic. Although the introduction of incentives such as mortgage payment holidays have eased the pressure on some families, there are still questions for motorists who are struggling to pay monthly fees for their vehicles.

With around 9 in 10 new cars in Britain bought using some sort of finance, the coronavirus outbreak will certainly be causing concern for many drivers who have a shrinking budget. If you are looking for some relief on your car finance payment due to COVID-19, here is what you should know….

Tell your finance provider straight away

All lenders are required by the Financial Conduct Authority (FCA) to work with their customers to come to an arrangement that is in the interests of fair and appropriate customer outcomes. This includes offering payment holidays of up to three months for customers who’s individual or household income has been affected directly by COVID-19.

Communication is key. If you are a customer suffering financial difficulty or are anticipating payment problems due to the coronavirus, get in touch with your lender as soon as possible. Be aware that call volumes will be very high at the moment, and most lenders will be working with an unprecedented number of concerns. Use online forms and emails where possible. Some lenders may have moved employees from sales and new business acquisition to client support. They may also pause new lending to support their existing client base. Be patient when contacting your lender.

Work with your lender

The solutions will vary from lender to lender and customer to customer. Keep in mind that lenders will be underwriting whilst giving consideration to customers in different circumstances, so two people may not get the same outcome. Discuss your concerns with your lender and work together to find an answer that best suits your circumstances. Not all lenders will be able to offer you a car finance payment holiday, but they will be sympathetic to your situation and can advise on further action to take.

Understand the consequences

If your lender is able to offer you a car finance payment holiday, be sure that you understand its impact. In most cases, if you take a payment holiday for two months, your loan will be extended for two months to cover the missed payments. Also, there should be no impact to your credit score. However, it will be visible on your credit file.

During the pandemic, you will have the option to stop your monthly car finance payments temporarily for a period of up to three months, which in some cases may mean you will accrue additional interest charges. At the end of the car finance payment holiday, the finance company will recalculate the remaining monthly payments and may increase them slightly to cover the cost of unpaid fees.

Contacting your lender

Are you struggling to pay your car finance payment? You can easily access lender contact details for many of My Car Credit’s finance panel. Get in touch with them today to discuss your circumstances.

If you are concerned about the financial impacts of COVID-19 or are experiencing financial difficulties, the following not-for-profit organisations also provide free, confidential and impartial debt advice and support:

Citizens Advice – www.adviceguide.org.uk

National Debtline – www.nationaldebtline.co.uk

Money Advice Service – www.moneyadviceservice.org.uk

If you need any further advice, the team at My Car Credit is here to help. We have years of experience in handling unique client cases. We are following Government guidelines and industry updates on dealing with the coronavirus and its consequences. Get in touch on 01246 458 810 or email us at enquiries@mycarcredit.co.uk

Rates from 9.9% APR. Representative APR 12.4%

Evolution Funding Ltd T/A My Car Credit

My Credit Rating

Excellent

  • You are a home owner
  • You have been on the electoral role for a long period of time
  • You have current credit arrangements and mortgage with no defaults
  • You have no CCJs, credit arrears or missed payments
  • You rarely apply for credit
  • You are employed or self-employed

Good

  • You are on the electoral role
  • You are a home owner or long standing tenant
  • You have a stable employment history
  • You have current credit arrangements with occasional missed payments
  • You have no CCJs

Fair

  • You are or have recently been on the electoral role
  • You may have recently changed address
  • You may have occasional missed payments
  • You may have an old CCJ
  • You may have regularly applied for credit

Poor

  • You may have had frequent changes in address
  • You may not be traceable on the voters roll
  • You may have exceeded credit card limits
  • You may have missed payments on current agreements
  • You may have had a CCJ in the past

Bad

  • You may not be traceable on the voters roll
  • Your credit cards are over their limits
  • You have recent CCJs
  • You may have been refused credit elsewhere
  • You may be in a debt management plan
£

X monthly repayments of
£X

Typical rate

Loan amount

Total payable

X% APR*

£X

£X

*for illustration purposes only

No impact on your credit score*

Representative Example

Borrowing £7,500 at a representative APR of 12.4%, annual interest rate (fixed) 12.36%, 47 monthly payments of £196.44 followed by 1 payment of £206.44 (incl. estimated £10 option to purchase fee), a deposit of £0.00, total cost of credit is £1,939.12, total amount payable is £9,439.12.

Evolution Funding Limited, trading as My Car Credit, is a credit broker and not a lender.

Please ensure you can afford the repayments for the duration of the loan before entering into a credit agreement.

*Initial application is a soft search. Should you progress, some lenders may perform a hard search on your credit file.

Require more help?

Got a question you can’t find the answer to, or need some advice and guidance around taking out car finance? Our Car Credit Specialists are friendly, experienced, and here to help so get in touch today!