If you want to learn about the payment holiday scheme in the aid of repaying your debts, this article will tell you everything you need to know before confirming!
Table of Content
What is a payment holiday?
A payment holiday is typically an agreement with your creditor/ creditors that allows you to have your debt repayment paused.
Whether your debt is for your mortgage payments, personal loan, or credit cards, payment holidays are the perfect ‘breathings space’ break for those struggling with their financial circumstances.
Although your monthly payments are stopped for a short while, interest will continue to be added to your balance.
What is a mortgage payment holiday?
A mortgage payment holiday is for people struggling with their monthly mortgage repayments.
Your lender, if agreed to, will allow you to temporarily stop repaying your outstanding mortgage balance, and take a mortgage payment holiday.
Making mortgage payments can be daunting and expensive, therefore, having mortgage payment holidays is the ideal escape for a short time, until you and your lender agree to start paying the missed payments again.
With mortgage payment holidays, your mortgage arrears can be dealt with in a way that won’t leave you in the dark.
How do payment holidays work?
The process of a payment holiday is easy!
Payment holidays can occur when you request one from your creditor.
You should be aware that not all creditors will be happy for you to take a payment holiday for debt repayments.
A payment holiday will appear on your credit file, so you should think about how long you take your payment holiday as this will affect how easy it is to get credit.
Can I get a credit card payment holiday?
It is possible to get a credit card payment holiday for your debt repayments, however, having a payment holiday last a while can affect your credit report.
Despite already existing, credit card payment holidays were thoroughly introduced for people affected by the coronavirus pandemic.
Many people managed to get a coronavirus mortgage payment holiday as they were struggling to make their mortgage payments. Especially in the lockdown, a mortgage holiday was needed to prevent falling deeper into debt.
How do I get a payment holiday?
To get a payment holiday for debt repayments, you must request a break from your lender.
There is no complete certainty that your lender will accept the request.
When requesting a payment holiday, you must inform the creditor of the reason for your break, why it will be the most ideal circumstance, and when exactly you plan on paying future payments again.
Asking for a payment holiday.
Asking for a payment break, whether it is a coronavirus mortgage payment holiday or a payment break for a credit card, will often strike fear in many people.
You will simply have to contact your creditor and give them details, such as:
- Living expenses
- Income
- Debts you have
- Financial situation
- The reason for a payment holiday
- Filled in income and expenditure form
When your request has been accepted, you should send a further request for a confirmation email.
In the case of your request is denied, you can attempt to gain free debt advice from a money advice service.
How long can a payment holiday last?
The length of your payment holiday is very dependent on your financial situation and your lender.
It can vary from weeks up to 12 months, however, the majority of mortgage payment holiday time frames are up to 6 months. If necessary, you can request a payment holiday extension.
Of course, the length of time that you take a payment holiday will affect your credit file, therefore, it is important to discuss the debt repayment breaking time.
Can a payment holiday affect my credit rating?
Mortgage payment holidays will affect your credit rating, however, if you had a Coronavirus mortgage payment holiday- this will not appear on your credit report.
What happens at the end of a payment break?
When the payment holiday ends, the interest will have continued to add each month you didn’t pay, therefore, the payments required will now be higher.
Your money worries should have slimmed after the payment breaks and the remaining mortgage balance or unsecured debts will be paid in monthly repayments.
Credit Card Debt Payment Holiday
You can request a payment holiday from your credit card providers in April 2024.
If struggling with debts on credit cards you can approach your credit card creditors to ask for an informal break from payments, to give you some time to deal with your debts.
Each creditor of the credit cards will consider your request differently and may decline.
A credit card payment break may affect your credit score.
Final Thoughts
After reading this article, you will have a clear idea of a payment holiday and how it can benefit you!
If you want to find out about any more solutions for your debt, you can click on the link below!
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