What is a...

Payment Holiday

A Payment Holiday is a feature offered by some loans and mortgages that allows you to miss the occasional monthly payments agreed in advance.

They have existed for many years but were thrust into the spotlight in March 2020 as one of the economic support measures announced in the midst of the Covid-19 crisis.

In ‘normal’ times they are only allowed subject to certain conditions and not all credit agreements will allow them. A few lenders record a Payment Holiday on your Credit Report as an Arrangement to Pay, which could have serious consequences for your Credit Score and ability to take out credit.

Payment Holidays offered as part of the Covid relief measures should not damage your Credit Report. Despite this, there have been reports of lenders incorrectly recording coronavirus related Payment Holidays punitively against their customers.

Always ask your lender for clarification on how a Payment Holiday will be recorded on your Credit Report before you take advantage of it.

If you’re planning on taking out a Payment Holiday, you can monitor your Credit Report to see exactly how your lender records it. Some lenders may report it as a neutral marker, while others as a harmful marker. The only way to know how it appears against your name is to watch over your Credit Report yourself.

You can try the UK’s most detailed Credit Report free for 30 days, then just £14.99 per month. Cancel easily and quickly at any time. Our professionally qualified Credit Analysts are on hand to guide you should you have any questions.

How do I take a Payment Holiday?

The first step is to check that you’re allowed to take a break with your current agreement. Second, you’ll want to see how your lender deals with the repayments to make up for the time that you’re not paying. This will normally be in the form of increased costs (both monthly payments and overall outstanding balance) after the holiday period. If you cannot afford these costs, it may be worth thinking about finding a mortgage with a cheaper rate.

Your bank might ask for several months’ notice before the start date for a mortgage holiday.

Has the coronavirus crisis made it easier to get a Payment Holiday?

On 17 March, the Chancellor announced supportive measures to provide relief to borrowers financially impacted by the Covid-19 pandemic. Chief among these changes was an agreement with major UK banks to offer three-month mortgage Payment Holidays.

To check whether you’re eligible for a Payment Holiday, you’ll want to contact your lender directly so it can assess your current situation.

A few lenders record a Payment Holiday on your Credit Report as an Arrangement to Pay, which could have serious consequences for your Credit Score and ability to take out credit.

How long can Payment Holidays last?

Depending on your provider and your eligibility, holiday periods can last anywhere from one month up to 12 months.

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