Payment holidays

A payment holiday is a temporary break from making debt repayments agreed with your creditors.

It could be an option for you if you’re falling behind with repayments on products like: 

• credit cards
• loans
• mortgages

No. A payment holiday doesn’t write off your debt. You’ll still need to repay what you owe, possibly with extra interest.

But a payment holiday may take away some of the financial pressure you’re under for a short time, so you can take steps to improve your situation. If you haven’t already, it’s a good idea to get debt advice during a payment holiday so you can try and sort out a longer-term solution to your money worries.

If you want a temporary break from debt repayments, get in touch with your creditor and ask them.

They’ll consider:

• whether you meet their criteria
• if you have a good payment track record
• your wider financial situation

Not every lender offers payment holidays. Contact yours directly to find out their policy.

Missed payments are usually recorded on your credit file, so a payment holiday is likely to affect your credit score.

That could make it harder for you to borrow money in the future.

Depending on how long your payment holiday lasts, creditors may also issue you with a default notice.

Missed payments and defaults stay on your credit file for six years.

If you’re worried about what a payment holiday could mean for you in the longer term, ask your creditor how they’ll report it first before agreeing to anything.

Not all lenders offer mortgage payment holidays, so you’ll need to check your provider’s website or ask them directly.

Each lender has its own terms and conditions.

For example, some might only offer payment holidays if you lose your job or experience a steep drop in income.

If you want a payment holiday, you must ask for it in advance (before you miss any payments). You’ll be expected to share details about your circumstances and your financial situation.

Before going ahead with a payment holiday, ask your lender: 

• how long it will last
• how much extra interest you’ll have to pay
• what your repayments will be when it ends
• how it will affect the term of your mortgage

If your request for a payment holiday is accepted, they’ll let you know in writing.

Make sure you keep any correspondence in case you need it later.

Mortgage payment holidays have advantages and disadvantages, so you need to weigh up all the factors before making any decisions.

On the one hand, a mortgage payment holiday can:

• take away the pressure for a bit
• give you time to get your finances in order
• remove the immediate risk of losing your home

But on the other:

• you may end up paying more interest
• your repayments may go up when the holiday ends
• it might affect your ability to borrow in the future

If you’re concerned about the longer-term consequences of agreeing to a payment holiday, speak with your mortgage lender.

When the holiday ends, your payments will restart.

They might be more than they were before to cover what you missed as well as any extra interest that was charged.

Alternatively, the term might be extended, meaning you’ll be paying back what you owe for longer.

If your lender doesn’t offer or won’t agree to a payment holiday, you could ask them if they’ll accept lower monthly payments.

Alternatively, if you get debt advice, the expert you speak to may be able to apply for breathing space on your behalf. This gives you temporary protection from creditors, giving you time to sort out a longer-term solution to your money worries.

Debt advisers can also help with:

• working out a household budget
• making sure you’re claiming all the benefits you’re entitled to
• finding a suitable debt solution