How to Limit the Impact of Coronavirus on Your Debt

As the pandemic continues, what are your cost-cutting options if coronavirus leaves you slipping further and further into debt?

This article was updated on 20 March

Trying to give debt advice in the current climate is like to trying to a hit a moving target. Things are changing fast, but the information below was correct at the time of writing.

I am on PAYE what assistance can I get from HMRC and my employer?

We have been following the updates closely from the Government and HMRC in relation to being furloughed and your salary.  We are happy to discuss the guidance with you but if you are employed on PAYE you can read the assistance here:

https://www.gov.uk/government/publications/guidance-to-employers-and-businesses-about-covid-19

I am self employed what assistance can I get from HMRC?

If you are self employed then please see the following guidance.  We are here to give you help to ensure you have put in your latest tax return and get you a holding position with your creditors at no cost to you.  You can find the guidance here:

https://www.gov.uk/guidance/claim-a-grant-through-the-coronavirus-covid-19-self-employment-income-support-scheme

Coronavirus: Should I borrow more?

The situation isn’t clear. Many lenders are offering additional overdraft facilities or extending credit card limits, but there are two problems with this:

1. You’ll have to pay it back at some point; and
2. Many lenders are introducing sweeping new overdraft charges from 6 April, so extending your overdraft could be a very pricey way of getting access to money. Banks are being urged to suspend the new charges but they haven’t yet said they will.

In any event, borrowing more now if you know you’ll struggle to repay the debt once the crisis is over is just shifting the problem to another time.

So rather than borrowing more, try to use ways of reducing your payments.

Coronavirus: How can I lower my outgoings?

• Loans: Many banks and loan providers have said they will offer payment breaks
• Utilities: Utility companies have plans in place to help those who are left struggling to pay for gas and electricity during the outbreak
• Credit cards: Some card companies are offering payment holidays or waiving fees for missed payments – although see below re missed payments
• Council Tax: Many are making calls for Council Tax payment to be suspended. This has not been confirmed as a national policy as yet, but if you’re struggling to pay local authorities do have support mechanisms in place
• Cancel subscriptions: Not ideal if you are self-isolating or in lockdown, but stopping Netflix, Sky, Prime and other subscription services could help you make valuable savings

Don’t wait for help to come to you. If you’re struggling to pay, check online to find out what support your bank, council or credit company is offering, then get in touch with them.

Coronavirus: I’m struggling to pay my mortgage this month. What should I do?

In his recent Budget, the Chancellor pledged that everyone who was struggling to pay their mortgage as a result of the coronavirus would be able to ask their bank for a three month ‘payment holiday’. The banks have now given some indication of how that might happen.

As The Guardian notes, there will be a fast track system so applying is easy and decisions are swift. Approval will not be automatic, although it’s unclear on what basis an application may be refused, especially if fast-tracking reduces the level of scrutiny applications usually receive.

Interest will still accrue during the payment break and will need to be repaid. It’s also important to note that this is a payment break – the payments you would normally have made will still need making at some point in the future.

If you need a payment holiday, you should contact your mortgage holder direct.

Will a mortgage break affect my credit rating?

It shouldn’t do. Lenders are being encouraged to offer “forbearance” and ensure that a payment break doesn’t adversely affect your credit rating.

Missed payments: It’s important to work with your lender if you’re planning to miss a payment – and that applies to mortgages, loans, credit cards and everything else. Unless your lender tells you otherwise, do not assume it’s ok to miss a payment without talking to them first. Missing a payment without prior agreement could damage your credit rating and increase charges and penalties.

Coronavirus: I’m struggling to pay my rent this month. What should I do?

At time of writing, the Government has yet to publish any detailed plans for helping tenants, although the Prime Minister has promised to bring forward legislation protecting tenants from eviction and landlords’ trade bodies are suggesting they should deal with problems “sympathetically”.

Until anything concrete is approved, if you’re in danger of missing the rent this month, you should contact your landlord and explain the situation.

Financial Support

Some financial support is already available to individuals and we explore that here.

The government has made strong indications that more help is on its way, but there are as yet no details or timescales. So, if you can hold out until more help is made available, then do. But if your debts are unmanageable now and coronavirus has proved to be the last straw, we can help.

The find the best route out of debt for you, contact us.