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Derin Clark

Derin Clark

Online Reporter
Published: 28/01/2021

Job losses, reduced incomes and struggling business caused by the Covid-19 pandemic have had a devasting impact on many people’s everyday finances. Consumers who could comfortably manage debt before the pandemic are now struggling to keep up with repayments, with some for the first time finding they are unable to keep up with monthly repayments.

For those who are struggling to manage debt due to the Covid-19 pandemic, here are some different types of help available.

Covid repayment holidays

March 2020 saw the launch of repayment holiday schemes for consumers impacted by the pandemic and struggling to make mortgage, loan, and credit card repayments as a result. By the end of April 2020, there had already been 700,000 applicants for credit card repayment holidays and 470,000 for loan repayment holidays.

Originally, the repayments holidays were for a three-month period only, but this was extended in May 2020 so that consumers could have a six-month holiday and applications had to be made by the 31 October 2020. As the financial fallout from the pandemic continued, the scheme was extended again and now consumers have until the 31 March 2021 to apply.

Those who have successfully applied for a repayment holiday can have a maximum repayment holiday of six months – taken as two three-month repayment holidays. The repayment holidays must be applied for directly through the mortgage or credit lender.

Those who have taken a repayment holiday under this scheme will not have the repayment holiday noted on their credit file, but when applying for credit in the future, lenders can still find out about them.

Consumers should also be aware that during the repayment holiday period, interest will continue to be added to the debt. This means that after the holiday period has ended, repayments may increase, or the term of the mortgage or loan could be extended.

What help is available after repayment holidays end?

Consumers who are not eligible for a holiday repayment or who have used their maximum six-month holiday have further options available. In the first instance, consumers in this situation should contact their lender directly and work with their lender to work out a repayment plan.

Additional help for mortgage borrowers

For those struggling with mortgage repayments, their mortgage lender may suggest that they temporarily switch to an interest-only mortgage, which could save them hundreds of pounds in monthly repayments – to find out how much an interest-only mortgage can reduce repayments, use our mortgage repayment calculator . Mortgage borrowers who take this option should be aware that it would mean that they are not repaying the mortgage loan, which means they are not paying towards owning their home, and instead are just paying the interest the loan accumulates. As such, those who switch to an interest-only mortgage should move back to a standard mortgage as quickly as they can and may have to increase their monthly repayments or extend their mortgage term to make up the capital repayments that have been missed.

Alternatively, their mortgage lender may allow the borrower to extend their mortgage term. Although extending the term will mean that they will have to continue making repayments longer than they originally anticipated, it could be a good way of reducing their monthly repayments now. Borrowers with this option could consider increasing their mortgage repayments to reduce the mortgage term once they are finically able to.

Mortgage borrowers who come to a payment plan arrangement should be aware that this will likely be noted on their credit file and could impact their credit score when applying for future credit.
Another possible option for mortgage borrowers is to check to see if they are on their mortgage lender’s standard variable rate (SVR). Although mortgage borrowers who have seen a drop in income, for example being furloughed, during the pandemic are unlikely to be accepted onto a remortgage deal as the lender will carry out new affordability checks, they still may be able to switch to a cheaper deal. Brian Murphy, head of lending at Mortgage Advice Bureau, explained: “Unfortunately, if the borrower is on furlough or their income has significantly reduced due to Covid-19, then remortgaging won’t be an option for them. This is because the borrower will be subject to a new set of affordability checks as they move from one lender to another – the new lender will then work out their affordability based on current income. Unless the borrower has evidence of their return to full income or a return-to-work date, it is unlikely they will be accepted for a remortgage.

“However, if the borrower is currently on an SVR mortgage, they should be eligible for a product transfer with their existing lender. Although their income circumstances may have changed due to Covid-19, as long as the borrower has met their regular mortgage payments consistently and aren’t in any sort of payment arrears, a product transfer should be an option. It’s worth noting some lenders may not offer a product transfer but the main high street lenders are more likely to.”

Mortgage borrowers on their lender’s SVR should speak to a mortgage broker to see what options are available to them and whether they can switch to a cheaper deal.

Additional help for credit card and loan borrowers

Again, consumers struggling to make credit card and loan repayments due to the pandemic should speak to their lender to come to a payment plan.

Options their lender may suggest include temporarily reducing the monthly minimum payments and/or reducing the interest payable. Alternatively, the lender may increase the term of the loan, which although will mean paying off the debt for longer, will reduce the monthly repayments.

As with mortgage payment plans, consumers should be aware that the agreement they come to with their credit card or loan provider will usually be noted on their credit file, which could have an impact on their credit score and ability to apply for future credit.

Covid debt management plans

Consumers who are struggling to repay debt due to the pandemic can also get help and support by speaking to Citizen Advice or a free debt charity. Some free debt charities may also be able to provide consumers with a Covid debt management plan that will help them to manage their debt during their period of reduced income.

For example, StepChange Debt Charity has created a Covid Payment Plan (CVPP), which it designed in consultation with HM Treasury and is supported by the Money and Pension Service. CVPP was launched in October 2020 and although there are only currently hundreds of consumers on the plan, the debt charity is expecting “major demand” for the product later in the year when payment deferrals from creditors end. Explaining how CVPP is different from StepChange’s standard debt repayment plans, Sue Anderson, head of media at StepChange, said: “Unlike other debt solutions, the purpose of the CVPP is to give people with multiple recently acquired debts a forbearance bridge of up to 12 months, to help them return to meeting their normal financial commitments as soon as possible. It is not a long-term debt solution based on long-term repayment and/or relief like other current debt solutions available.”

She added: “CVPP is specifically aimed at those expecting to face only short-term difficulty due to the pandemic. For example, the product would be suitable for someone who has been furloughed due to lockdown, but expects their earning to return to normal within the year.”
To be eligible for CVPP, consumers must meet the following criteria:

  • Be able to pay more than 33% of what would be their normal monthly payments on unsecured creditors* every month throughout the duration of the plan.
  • There is a reasonable chance that their income will recover within the next 12 months.
  • Be able to repay all priority payments** they’ve missed within the next 12 months, or they’ve already made an arrangement to do so.


*For example, but not limited to: Credit cards, personal loans, store cards, payday loans and catalogue accounts.
** For example, but not limited to: Council tax, water, gas, electricity, rates, and other priority arrears not connected to housing or assets.

Reducing bills

Consumers who are financially struggling due to the Covid-19 pandemic should aim to reduce their monthly bills as much as possible.

Some households may be eligible for a reduction in their council tax payments, but this depends within which council the household lives. Those struggling to pay their council tax should contact their council directly to see if they are eligible. More information about council tax reduction can be found on the Government website.

Those who have seen their income fall due to the pandemic can also look at ways of reducing other types of bills. They can, for example, look at switching to a cheaper phone tariff if they are not in a fixed contract. As well as this, further reductions to outgoings can be made by cancelling entertainment subscriptions.

Shopping around for cheaper home insurance, gas and electricity suppliers and car insurance can also all help to reduce outgoings, which will enable consumers to free-up money that can be used to pay towards their debt.

Boosting income

Along with reducing bills, consumers can also look toward boosting their income.

Those who have been made redundant should look to see if they are eligible for Universal Credit.

Meanwhile, those who are unable to work due having to self-isolate, may be eligible for a £500 payment through the Test and Trace Support Payment scheme – more information about it and how to apply can be found on the Government website.

Consumers who are unable to work due to being ill with Coronavirus, or who are having to self-isolate, for example those who are shielding because they are at high risk, may be entitled to Statutory Sick Pay (SSP). This is a weekly payment of £95.58 that is paid by their employer for up to 28 weeks.

Another option that may be available to older homeowners, is to release equity from their home through equity release. This is a type of loan that is normally available to those aged 55 or over and who own a significant amount of equity in their home. The money borrowed through equity release does not have to be repaid during the borrower’s lifetime, unless they move into permanent care, and can often be taken as a drawdown option – meaning that the borrower can release chunks of money as and when they need to. Equity release can, however, have a long-term impact on finances, especially as interest is accumulated through the duration of the equity release loan, which can result in the borrower leaving behind a significantly reduced inheritance. For those considering equity release, it is advisable to speak to an independent financial adviser to ensure it is the right option for their circumstances.


Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time. Links to third parties on this page are paid for by the third party. You can find out more about the individual products by visiting their site. will receive a small payment if you use their services after you click through to their site. All information is subject to change without notice. Please check all terms before making any decisions. This information is intended solely to provide guidance and is not financial advice. Moneyfacts will not be liable for any loss arising from your use or reliance on this information. If you are in any doubt, Moneyfacts recommends you obtain independent financial advice.

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