Millions of car finance and payday loan borrowers set to be given more time to repay loans

3 July 2020, 10:18

Loan extensions will be extended
Loan extensions will be extended. Picture: Getty Images

Car finance and loan payment holidays could be extended amid the coronavirus crisis.

People using car finance plans will be given an extension to their repayment holidays under new rules.

In an announcement by city watchdog the FCA, these payment holidays will also cover rent-to-own, payday loans, buy-now-pay-later arrangements and pawnbrokers.

The plans have been put in place to ensure borrowers are supported as businesses get back on their feet amid the coronavirus outbreak.

Lenders were originally told to put a pause on car finance and payday loans repayments back in April, with the rules coming into force for three months.

Loan freezes will be extended until October
Loan freezes will be extended until October. Picture: PA Images

But with this now coming to an end, those struggling financially still need help.

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Christopher Woolard, FCA interim chief executive, said: “It is vital that people facing temporary payment difficulties because of the impact of coronavirus get the assistance they need.

"For those who have already taken a payment freeze and can afford to start making payments, even partially, it is in their best interest to do so, but for those that need help it will be there.”

There are also bans on repossessing cars and other goods while the payment freeze is in force, but firms will be able to charge interest.

The guidelines are being consulted on until Monday 6 July, and are thought to take effect by the end of next week.

Who is eligible for a payment freeze?

The rules apply for customers whose financial difficulties have been caused by coronavirus.

But under the new rules, payment freezes don't have to be offered automatically so you will have to ask your lender.

Firms won't be expected to investigate why you're asking for a payment freeze, however they could refuse you one if this would be against your interests.

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