Payment Breaks Coming to an End
There is a timebomb slowly counting down to a debt explosion. During the coronavirus pandemic, high street banks have allowed 1.5m ‘payment holidays’ for those struggling to repay credit cards and personal loans. These payment holidays allow people to not repay their debts for three months. However, interest rates are (generally) still accrued on the debts, and with many people losing their jobs or suffering a wage decrease, at the end of the three months, many people are going to return to a serious debt problem with no way of repaying.
Household debt on credit cards and loans and car finance had been rising before the coronavirus struck. Damon Gibbons, director of the Centre for Responsible Credit, said some lenders were being more flexible than others with consumers. “There’s going to be a lender lottery as a result of all this,” he said.
“We were in the midst of a growth of household debt problems before the pandemic, and this is going to tip huge numbers of people over the edge, whether it’s living on furlough with 80% of wages, or looking forward to the jobs market shattering. People are going to be in real difficulty.”
Terrifying Debt Letters
Due to an out-of-date law, millions of those struggling to meet repayments are about to receive ‘threatening’ letters demanding repayment from their lenders. Although these letters cause massive levels of distress and can ruin lives, they are a legal requirement, and the lenders have little option about sending them. Even though lenders have granted the payment holidays, they will be forced to send these letters demanding repayment, causing confusion and distress.
The letters even give out-of-date advice, causing further confusion. Currently the legally mandated warning says, in bold and in capitals: “IF YOU ARE NOT SURE WHAT TO DO, YOU SHOULD GET HELP AS SOON AS POSSIBLE. FOR EXAMPLE YOU SHOULD CONTACT A SOLICITOR, YOUR LOCAL TRADING STANDARDS DEPARTMENT OR YOUR NEAREST CITIZENS’ ADVICE BUREAU.”
However, the correct advice for many people struggling with debt is not to go to a solicitor but to contact one of the many free debt advisers, including Debt Assist UK, that can help with putting together a repayment plan.
Research has indicated that in England, as many as 100,000 people in problem debt considered taking their own lives each year, and that the debt letters were a key contributing factor.
If you receive one of these threatening letters, or you are worried about your debts at all, please don’t hesitate to contact one of our friendly advisers. Alternatively, please visit this page for a list of mental health charities that can help.
Don’t struggle alone.
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