"For those in financial distress it’s a key lifeline. But these arrangements are rarely put in place overnight."
With the average approval time for payment holidays on loans and mortgages taking upwards of a week, the firm is urging borrowers to act quickly to avoid unauthorised missed payments and long-term damage to their creditworthiness.
According to the research, it appears that more than three million Brits have missed regular payments already because of coronavirus disruption and nearly five million expect to do so. Despite this, the majority of those struggling are yet to set the process in motion.
One in five (20%) surveyed don’t believe they’ll be eligible for a break, while a similar number (17%) simply don’t know where to start. And despite assurances from credit bureaus, one in five (22%) remain concerned about the impact of a break on their credit score.
Instead, struggling borrowers are turning to alternative means to relieve Covid-related financial concerns, dipping into savings (25%), taking informal loans with a friend or family member (18%), or even turning to payday loans (17%) to make ends meet. Worryingly, nearly a quarter of such consumers (23%) are cancelling direct debits themselves without discussing with their bank.
Akansha Nath at Credit Karma commented: “Credit reporting agencies have agreed that any consumer using an ‘emergency payment freeze’ for those affected by coronavirus won’t see their credit score impacted. So for those in financial distress it’s a key lifeline. But these arrangements are rarely put in place overnight.
“You’ll need evidence that your repayment holiday has been approved by your lender, and this can take time. Borrowers should try to engage in a dialogue with their lender as soon as they’re concerned that they may miss a payment, as defaulting will have an impact on your score."
