Loan payment holiday

Terry67

Hi,
My income has been reduced due to the Covid issue so I spoke to my bank Barclays about the possibility of a loan holiday. They directed me to the form and information page where I could apply. At the bottom of the loan holiday help page it gave two examples of the additional costs which would be added to the loan once it was repaid. One example had an additional cost of £122 and the other £412. Both examples used had a lower APR than mine so the additional cost will be hundreds of pounds, but how many? With this in mind I spoke to the chat assistant and he confirmed he would not be able to provide me with a figure. My question to him was simple, how can the bank expect someone to accept so called "financial support" if they don't know the cost? How would anyone possibly sign up for anything without knowing the final cost??? He confirmed the figure would be sent to me in writing but only once I had completed the loan payment holiday request.

To say I was bemused and angry would be an understatement so I made a formal complaint. I received a written reply from Barclays stating my complaint had been "resolved and closed". It stated they had investigated but were unable to agree with my complaint as the information isn't generated till after the application has been accepted and applied to the loan. I find this whole scenario absolutely flabbergasting that in a time of financial distress for millions, Barclays Bank expect their customers to blindly accept this so called " support " without knowing the financial implications first. Surely the bank need to alter this procedure to allow customers to request a loan holiday and then see the additional costs BEFORE accepting the application or a simple calculator tool on the information page which could be used to enter the loan details to show the additional costs.

John_

Why not just work out the cost yourself? If you know the APR and the amount outstanding then you’ve all you need.

Grumpy_chap

@terry67 - it is good that you realised a loan payment holiday has a cost to it.  As a simple guide, if you ask for a three-month payment holiday then the cost will be at least three months' worth of interest.  However, if that interest is then spread across a long remaining term (as would be the case with a mortgage), the extra cost over the term is the interest on that interest and accumulates to a very high number.  Martin Lewis / MSE team cover this in more detail in one of their explainers.

Terry67

John_ - You are asking a question to which I thought the answer was blatantly obvious John. 
Grumpy_chap - thanks for the response.

Grumpy_chap

I think the reason the bank are not giving a number in advance is because of the many variables that you could make as part of the change.  The three month payment holiday and immediate cost is the easy part.  What happens then really depends on whether you increase monthly payments but keep the term the same, keep payment the same but increase the term, or if the loan allows over-payments, so you pay back the extra in an accelerated way.

Generally Martin Lewis advises that payment holidays are a last resort.  Payment holidays help cash-flow, but can work out expensive.  I think there are many people who are just seeing the short-term saving and not realising the long term cost.

You mention that your income has reduced because of COVID, but not by how much or for how long.  Have any of your costs also reduced?  If you are furloughed at 80%, then once the savings on commuting etc are assessed, your overall position may not be massively changed.  It might be worth doing a SoA as this might make things more visible to you and if things still look bad, share your SoA in the Wanna-be-debt-free forum for constructive support to see if there are other changes you can make more easily before jumping into that loan payment holiday.

Here is the link to the guide Martin Lewis has published:
https://www.moneysavingexpert.com/news/2020/03/uk-coronavirus-help-and-your-rights/?_ga=2.60555373.1589833193.1588837477-953862555.1588837477

Terry67

Thanks again for your detailed reply Grumpy_chap  its very helpful.   

John_

Terry67 said:

John_ - You are asking a question to which I thought the answer was blatantly obvious John. 
Grumpy_chap - thanks for the response.

It’s not obvious at all, sorry, if you have discalculia I can’t see it mentioned. If you need some help with the maths then just let people here know the amounts and someone will be able to do the calculation for you.