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In principle, there was a lot of support for people who got into difficulty due to COVID19.  In practice, it wasn’t always easy for people to access that support, at least not quickly.  Lenders were trying to cope with a deluge of requests for help while adapting to remote working.  If you ended up missing payments without an agreement, you need to address the situation.

Speak to your lender

Lenders may show forbearance towards people who miss payments, especially due to COVID19.  They will not, indeed cannot, ignore them.  If you are still behind with your payments, you absolutely must speak to your lender, even if you’ve been making payments of some sort.  If you have made up the payments, then it may still be worth speaking to your lender.

You can ask if they will remove any negative marks against your credit record.  They may say no.  There is, however, no harm in asking.  Assuming your late payments were due to COVID19, you can point out that you would have qualified for a payment holiday.  You can then explain what prevented you from registering for one.

For example, if you tried calling your lender but found yourself on hold for an inordinate length of time (or accidentally cut off), then let them know.  Realistically, you’re probably not the only person in that situation.

Assess your finances now

There are basically two questions you need to answer.  Firstly, can you afford to live and still make the minimum repayments on all of your debts?  Secondly, are you getting the best deal on all of your debts?  Hopefully, the answers to both questions are yes.  If, however, the answer to the first question is no, then you need to get professional advice immediately.

For clarity, if you really are unable to live and make the minimum payment on your debts then you are insolvent.  That does not, however, necessarily mean that you will have to go bankrupt.  There are lots of possibilities in between solvency and bankruptcy and a debt counsellor will be able to guide you through them.

If the answer to the second question is no, then you also need to take action.  You may, however, need to use a little strategy.  If you have a late/partial/missing payment on your credit record, you may find it difficult to get a new deal even with your current lender.  Remember, there’s a difference between showing forbearance and offering someone your best deal.

You may therefore need to work on repairing the damage to your credit rating before you can look at switching to a better deal.  You can use this time to see if you can reduce the amount you owe by more than just the minimum payments.

Qualifying for a better deal

Time and good behaviour will mend your credit record.  Part of the reason it will mend your credit record is because it will reduce the amount you owe already.  The more you can pay back now, the less you will need to borrow when you switch.  The less you need to borrow when you switch, the easier it can be to get accepted.

This means that it’s definitely worth making the effort to make overpayments if you possibly can.  Even small overpayments do add up.  If your income has been hit by COVID19 make sure you are claiming any benefits/grants you are allowed.  Also, see if you have any options for increasing it at all.  Per the previous comments, small increases do add up.

Likewise, do everything you can to budget effectively.  In particular, if you have any ongoing contracts, make sure you’re getting the best deal on them or exit them as quickly as you can.  It can, however, be worth spending a little more on insurance to make sure that you are protected from the unexpected.

For more information or confidential advice, please contact us.

Blackpool: 01253 299 399 | Carlisle: 01228 558 899