In life, there are things that can happen which affect your financial circumstances. Whether it’s losing a job, having a baby, or just having unexpected costs that mean you have less money than normal, it’s all too easy to have issues with finance repayments. But if you are struggling to make your car loan repayments, you should not try and ignore the issue. There are options available to you if there are problems. In these COVID times, having that support is more important than ever. So here is our guide to help you if you are struggling with your car loan repayments.
The first step should be to speak to your finance provider. If they are FCA regulated, then they will want to help you so that you don’t start getting into trouble with debt and heading towards a potential default on your finance agreement.
Call the provider and explain to them the situation. Whether you think the issue with repayments is temporary or something that will last a lot longer, then speak with them and see what support they have available.
An option you may have available to you is to take a payment holiday. This is where you can take a break for a few months from repayments, giving you some breathing space to manage your finances. This holiday shouldn’t affect your credit rating. While you may still be charged interest for the missed months, it will give you some time to better balance your budget and income.
As part of the COVID support offered by the government, you can apply for a car finance payment holiday up until the 31st March 2021. This can be for a maximum of six months and is available to those on a PCP, PCH, and HP agreement. Further information about this is available from the FCA.
You may be worrying what the finance provider will ask you when you apply for a car finance holiday. All regulated providers are required to help you as best they can, so they may even offer an alternative to a holiday that might be more suitable.
In any case, they should check how much you have paid off on the agreement already, how much you want the holiday to cover (if not the full amount), if you will increase the repayment amounts after the holiday has finished, and if this will increase the total amount owed after the holiday has finished.
There may be other options available to you as an alternative to payment holidays. You may be able to refinance your package to lower monthly payments, or you might be able to pay a lump sum to reduce the cost of the payments over the rest of your agreement. You may even be able to return the car early. While not ideal, if it means you have the space you need to get your finances in order, then it may be the best option for you.
Whatever happens, you should ensure that you always use an FCA approved finance provider. If your provider is unregulated, you may not have the protection you need when you take out a finance agreement.