My income has been reduced permanently and I’m worried I might not be able to meet my loan repayments. What options are available?

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In this video our Consumer managing director, Paul Went, provides guidance on what options are available if your income has been reduced permanently and you are worried you might not be able to meet your loan repayments.

During the height of summer more than one in four workers in the UK, or nearly 10 million employees, had been placed on the government’s furlough scheme1.

Meanwhile, Britain’s unemployment rate rose to 4.1 per cent in July, the highest level for two years2.

But with furlough potentially masking the true impact of the pandemic on the UK jobs market, there may be many more people who are at risk of being out of work when the current job retention scheme ends.

If you’re concerned about your job prospects and whether you might experience a drop in income in the months ahead, you might be considering the possibility of taking a payment holiday.

But what do you do if you have had a payment holiday on a loan and you’re worried you still might not be able to meet future repayments?

 

Reassess your finances

 

First of all, make sure you’ve got a really good handle on your expected income and outgoings for the next few months. If you know exactly what you’ve got coming in and going out, you may find you have more flexibility financially than you first thought.

At that point, make sure to get back in touch with your lender and explain your situation they should understand your circumstances and do their best to find a solution that works for you.

 

Discuss your payment options

 

Generally, lenders will offer support to their customers, but since the start of the pandemic the FCA has also called on lenders to make sure they are providing individual and personalised solutions to those affected financially by coronavirus.

With that in mind, it shouldn’t matter whether you have already had a payment holiday or not, as they should have tools available to support you if you’re still in some form of financial difficulty.

Depending on your circumstances, you may also have other options open to you, such as paying off your loan early which could help to minimise your outgoings over the long-term.

I understand this won’t be feasible for everyone, but it is an option worth considering if you have personal savings or a good credit record for example.

Some lenders do charge early repayment fees so make sure you are clear on these before proceeding.

Whatever route you choose to take, it’s important not to shy away from the issue and reach out to find out what solutions might be available to you. Remember - you are not alone in this situation and there are people out there who can help.

By Paul Went, Managing Director, Consumer Lending Division

 

1 HMRC coronavirus (COVID-19) statistics, Job Retention Scheme

ONS unemployment statistics May – July 2020

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