Managing your debt during the pandemic

To help ease some of your worries there some things you can do to prepare for the financial uncertainty and take steps to manage your debt.

Calculator and papers on desk

As things change rapidly during the coronavirus (COVID-19) crisis, this guide will be updated regularly to reflect changes in rules and regulations.

The outbreak of coronavirus (COVID-19) has had an unprecedented effect on economies in the UK and around the world. With productivity almost grinding to a halt as many workers practice social distancing and self isolation. It is understandable that the uncertainty during this crisis has many people worried about their finances. 

It is especially troubling for those worried about covering their debt during the pandemic. Fortunately, there are some things you can do to prepare for the financial uncertainty and take steps to manage your debt in the most effective way possible. 

Cut back on spending to pay down debt

If you aren’t already in the habit of making a monthly budget, this is a good time to get back to basics and make one. Calculate your incomings and outgoings and look for areas where you can cut out any non-essential expenses.

For example, with gyms closed, there’s no reason to keep paying your gym membership. Most gyms these days offer free anytime cancellation. Similarly with sports fixtures being postponed, if you have a sports package such as BT Sport, or Sky Sports you could freeze the sports package until things get back to normal. 

Any savings you make from cutting back plus any money you had ear-marked for travelling or other leisure activities that you can’t participate in can be used to pay down debt. It may be small, but every bit helps.

How do I manage mortgage or rent payments?

On 17 March the UK Government announced that all mortgage providers allow homeowners to take a three-month payment holiday if they’ve been affected by coronavirus in any way. 

Speak to your lender about taking advantage of this. It’s important to keep in mind that when you take a mortgage payment holiday, the three-month period will be added to the end of your term. 

For example, if you have 20 years left on your mortgage, the term will increase to 20 years and three months. Be aware that during those three months, interest still accrues, so your mortgage repayments after will increase slightly. 

To help renters having trouble keeping up with payments, the government introduced emergency legislation that protects renters from being evicted for at least three months. It’s also important to speak to your landlord and see how that can accommodate you during this difficult time. 

You can also apply for Council Tax Support through your local council's website to have council tax payments deferred for a period of time.

What about credit card debt?

Credit card debt can creep up on even in the best of times. It can be increasingly stressful if you’re facing a drop in income, or the loss of your job. 

According to the Financial Conduct Authority’s (FCA) rules, lenders and debt collectors should treat people who are struggling to make payments “with forbearance and due consideration. This means that if you can’t make a payment this month because your income has fallen they should work to help you.

Several banks and credit card providers have instituted measures such as payment holidays to help you through this period. Some providers are increasing credit limits on credit cards and overdrafts if you depend on them for everyday expenses. While some are waiving their fees for missed payments if you have coronavirus-related financial problems.

Change in persistent debt rules

During the outbreak, the FCA has also made changes to its persistent debt rules, which means that credit card providers can't cancel your card until 1 Oct 2020.

Other steps you can take is to avoid paying interest on your debt by transferring your balance to a 0% balance transfer card. However, due to the financial situation right now these deals may not be available for long, so apply as soon as you can.

Should you consider borrowing money?

Borrowing money when you're already struggling with debt is probably a bad idea.

Right now we don't know how long the coronavirus situation will last. Getting into more debt may get you into a debt cycle you can't get out of even when things return to normal. It'll be difficult for a while, but the good thing is everybody is in this together, even then lenders. They know why you're struggling so if you contact them, they'll find a way to help you out.

Where can you get free debt help?

If you want to speak to someone to get free debt help, you can speak to one of the following debt charities.

Why get personal debt help?

Getting advice can help you to:

  • Prioritise your debts

  • Set a realistic budget

  • Plan how you will pay off your debts

  • Communicate with your creditors