Car Finance Holiday.

jefaz07

Was thinking today, what evidence is needed for a car payment holiday, or has anyone got one? 

 My thoughts are request the holiday, use the all the money saved to pay off higher credit (credit cards) 
I haven’t done this, but just thinking. I don’t think it’s in the spirit of what it’s meant to do but if it gets my bills down overall potentially a good move? 

[Deleted User]

Ask your lender if they offer them and under what circumstances.

However, make sure you understand how the arrears would be repaid and over what timeframe.

jefaz07

I’m just thinking simply add 4 months on the end of agreement, I’ll possibly have the conversation though. And yes of course, I realise Interest would be added, I’d think at a lower rate, quick thoughts in my head were 3 months interest at 20% percent ish vs 3 months at 7% ish (I’ll have to check my agreements) 
I pay £400 pcm for my car so over 3 months the interest grows 

lopsyfa

jefaz07 said:

I’m just thinking simply add 4 months on the end of agreement, I’ll possibly have the conversation though. And yes of course, I realise Interest would be added, I’d think at a lower rate, quick thoughts in my head were 3 months interest at 20% percent ish vs 3 months at 7% ish (I’ll have to check my agreements) 
I pay £400 pcm for my car so over 3 months the interest grows 

As already suggested, have the discussion with your lender and get it in writing that nothing negative will be reported on your credit report. Also, you need to be super discipline to not just spend the money on something else or even pay the credit card and then spend the over-payment. This will leave you with the credit card as well as the car loan increased interests.

[Deleted User]

jefaz07 said:

I’m just thinking simply add 4 months on the end of agreement,

Probably not.  More likely is that your remaining payments increase to cover the arrears and the additional interest, with the term staying the same.

It will still be beneficial, but make sure you have enough to cover the increased payments.

jefaz07

Yea, I’ll have the conversation. I’m not concerned about if the payment slightly increased as I can cover that and I’ll also have discipline not to spend, there’s plenty left on there currently and I don’t spend it now so no reason to think I would just go mad. 

Credit file is a big issue, I wonder how it will be reported? Perhaps a U? If that’s the case an underwriter looking at your file will see U’s around the dates of COVID and put 2+2 together and assume you had nothing in reserve for unforeseen circumstances...and this affect your application in a round about way. I know we are told it shouldn’t impact, but how will we know? We are only told we don’t meet criteria. 

If this is to be the case then I’d rather just pay and not try to get fancy. 

7Phil

I am assuming it will be the same as with the mortgage holidays and your remaining monthly payments increase to cover the missing payments.
The holiday should stop you being reported as a missing payment but may still show on your credit file. Lenders and CRAs have been told that these arrangements should not result in a negative impact on a person's file but I am not sure exactly how that works in practice.

I am really wary of these holidays. They should only be used by people who would otherwise face financial hardship. Anyone using them when they can still afford the payments won't end up in a better place if they used them. In fact, it can be a very slippery slope into a worse debt situation.
I would only use them if you absolutely needed the cash.

jefaz07

7Phil said:

I am assuming it will be the same as with the mortgage holidays and your remaining monthly payments increase to cover the missing payments.
The holiday should stop you being reported as a missing payment but may still show on your credit file. Lenders and CRAs have been told that these arrangements should not result in a negative impact on a person's file but I am not sure exactly how that works in practice.

I am really wary of these holidays. They should only be used by people who would otherwise face financial hardship. Anyone using them when they can still afford the payments won't end up in a better place if they used them. In fact, it can be a very slippery slope into a worse debt situation.
I would only use them if you absolutely needed the cash.

I don’t need the cash and fortunately I’m able to cover these. 

Was just an idea to potentially save some money. 

I am nervous about the ‘impact’ on CRA’s. 

And I know using it like that isn’t the way it is intended.