Managing financial commitments

Unexpected changes in your financial situation may make it more difficult to manage outstanding debts, such as a mortgage or credit card bills. In all circumstances, it’s best to speak to your lender in good time before payments are overdue, to explain the situation. Many lenders are happy to amend payment plans to accommodate short-term financial difficulties.

Here are some key ways you may be able to make your financial commitments more manageable.

Personal loans and credit cards

Payment holiday

Many lenders (including credit card providers) are currently offering short-term payment holidays, where you and your lender agree to freeze monthly payments for a certain period. Your lender may also be temporarily waiving late payment fees, or able to offer reduced interest rates on top of this, so it’s worth checking your lender’s website to see what specific concessions they are offering.

Keep in mind that you will still owe any outstanding balance, and may still accrue interest on this during any payment holiday.

For more information on credit card payment holidays, visit the Financial Conduct Authority’s website.

Visit Halifax’s website to see examples of how a payment holiday could affect your payment schedule in future.

Credit card limit increase

You may also be able to increase the limit on your credit card by speaking to your provider. Make sure you have a plan in place to repay what you spend though, as unpaid credit card debt can quickly get out of hand. If you already find it difficult to manage your monthly payments, speak to your lender to see if you can arrange a more manageable repayment schedule.

 

Credit cards and APR

If you have outstanding credit card debts – or plan to make a large credit card purchase in the near future – it’s worth looking at your card’s APR, as this sets how much interest you pay on the money you owe.

Some credit cards come with introductory offers of 0% APR. If you plan to make a large purchase on a credit card, opening a new one with 0% APR can effectively allow you to borrow interest-free for a set period of time. However, make sure to pay off the balance before the introductory period ends or the regular APR rate will come into effect, and you will start paying interest.

You may also consider looking into 0% balance transfer cards, which allow you to move outstanding credit card debts (which you will normally be paying interest on) to a card with 0% APR.

Keep in mind though, credit card debts can grow quickly, so it’s always worth planning how you’ll manage your repayments before you take on any debt.

Mortgages

 

Payment holiday

Due to COVID-19, many lenders are now offering Payment Holidays – set periods of time where you don’t have to make mortgage payments. This has to be agreed with your lender first, and interest is still accrued over this period – but it can help reduce your financial strain short-term. Speak to your mortgage adviser to find out how Payment Holidays may affect your credit rating.

When speaking to your lender about a Payment Holiday, make sure that you both agree on a payment schedule that you can manage. This could mean making slightly higher monthly payments after the Payment Holiday, or adding a short extension onto your existing term.

See some examples of how taking a holiday can affect future mortgage payments on the Halifax website.

For more information about Payment Holidays, visit the Financial Conduct Authority’s website.

Overdrafts

Overdrafts

You may be able to ask your bank for an interest-free overdraft. Check your bank’s website to see what interest-free overdraft facilities they are currently offering.