Car loan payment holidays
If you’re struggling financially right now, because of the coronavirus crisis, you could apply for a payment holiday for certain types of debt.
Under new plans from regulator the Financial Conduct Authority (FCA), it will be possible to press pause on payments for car finance, payday loans and pawn shop borrowing.
The FCA wants the payment holidays to help borrowers who are having money difficulties during the Covid-19 pandemic.
For car finance providers, it wants the option of a three-month payment holiday for customers.
When customers are experiencing temporary financial difficulties due to coronavirus, car finance firms are being asked to hold off on car repossessions or ending loan agreements.
The FCA also wants car finance firms to avoid changing contracts unfairly; for example, where car values have caused a fall in used-car prices which could change the so-called balloon payment due at the end of a contract.
Businesses that offer rent-to-own, buy-now-pay-later and pawnbroking loans are also being asked to offer one-month payment holidays.
Pawnbrokers have been asked not to sell goods that customers have borrowed against if the customer is struggling financially.
The FCA said: “If the firm has already informed the consumer they intend to sell the item, they should suspend the sale during the payment freeze.”
If introduced, these new payment holidays would follow a scheme announced by the FCA last week covering personal loans and credit cards.
FCA interim chief executive Christopher Woolard said:
“We are very aware of the continued struggle people are facing as a result of the pandemic.
“These measures build on the interventions we announced last week and will provide much-needed relief to consumers during these difficult times.”
Finance firms have until 24th April to respond to the proposals, before they come into force shortly afterwards.
There’s a difference in the proposed lengths of repayment holidays because payday loans and pawnbroking tend to be much shorter-term arrangements, often with higher interest rates involved.
Mr Woolard continued: “We have tailored our measures to specific products. For most of these proposals, firms and consumers should consider the amount of interest which may build up, and balance this against the need for immediate temporary support.
“If a payment freeze isn’t in the customer’s interests, firms should offer an alternative solution, potentially including the waiving of interest and charges or rescheduling the term of the loan.”