Debt is faced by many, but credit cards are used by 32 million adults within the UK as a way of spreading out payments, according to the UK Cards Association. In a similar way, some take out personal loans to help with challenging financial circumstances. Unfortunately, some of these issues have only been further exacerbated by the lockdown measures which have been in place in Britain for a number of months. While Britons have managed to pay off a staggering £7.4billion in debt in April, as Bank of England figures showed, many households are still reckoning with tricky situations.
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Amid the lockdown causing chaos for families across the country, Express.co.uk spoke to Chris Lilly, Lead Publisher and expert in credit at personal finance website finder.com
Mr Lilly provided insight into the many schemes and support measures currently offered by the government and how these could be set to change over time.
One area many Britons have mulled over for their finances is whether or not to take a payment holiday.
Mr Lilly acknowledged this was a popular option for families, but added: “Crucially, you’ll still be charged interest during the holiday, so it’ll cost you more overall.
“Your loan term will be extended and/or your repayments will increase slightly after the holiday, so because of this they’re best avoided if possible and you should see if savings can be made elsewhere before opting for one.”
However, for those who do believe a payment holiday is the correct option for them, Mr Lilly said it is likely supportive measures will be extended.
The government has already announced the extension of mortgage payment holidays, and Mr Lilly has highlighted the FCA will give customers “every chance to get back on their feet”.
Others may wish to take advantage of the historically low Bank of England base rate to take out a loan at this time.
However, it is important to note there is risk involved.
Mr Lilly added: “Rates are exceptionally low, suggesting a borrowers’ market. However, it’s actually harder to get approved for a loan at the moment, because lenders don’t like instability.
“If you have a legitimate need to borrow money and believe your situation is stable – not many of us can say this – then you could absolutely opt to take advantage. Use soft search facilities to check whether you’d actually get approved without impacting your credit score.”
Finally, Mr Lilly stressed that it was important for Britons to look towards the future, and what the markets could hold.
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There has been speculation that credit card and loan companies could seek to incentivise customers to through measures such as reduced rates to get them back on the so-called ‘debt hook’.
This could be advantageous for lenders, but not so fantastic for those looking to borrow.
Mr Lilly believed some lenders may look to use the circumstances to their advantage, and thinks some deals favoured by Britons could be off the table for a while.
He concluded: “Lenders are being extremely cautious at the moment, but ultimately they need to lend to make money.
“They’ll look for new ways to tap into safe pockets of borrowers – for example through open banking, which helps lenders to assess risk based on more than just a credit record.
“Credit card issuers were already seeing profits squeezed through tighter regulation, so it would be extremely optimistic to expect to see the ultra-long zero percent deals that were available a few years ago any time soon.
“UK consumers love a loyalty scheme however, so that might be a more likely way that card issuers could bring new customers on board.”
Those who are struggling with their financial circumstances are encouraged to approach the Money Advice Service.
While the government backed website can provide Britons with assistance, it can also point people towards free and independent financial advisers to help with individual concerns.
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