Households in financial difficulties as 1.2 million credit cards and loans remain unpaid

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Consumers have claimed payment interruptions on more than 1.2 million credit card and personal loan accounts as the freeze resulted in borrowers being unable to make monthly payments.

In addition to the health effects of the coronavirus, the financial effects of a sealed-off economy have already started to take their toll.

Figures released by UK Finance, the banking association, showed that lenders gave credit card customers nearly 700,000 payment holidays. Another 470,000 personal loan accounts were also given a break in payments after being warned of financial difficulties.

There are around 51 million credit cards and nine million personal loan accounts in the UK.

Many of these customers will have lost their jobs or are trying to manage their expenses on a reduced household income. The dire state of consumer finances quickly became apparent after the Covid-19 outbreak.

In addition to unsettled loans and credit card debt, figures released last week showed that roughly one in seven mortgages is subject to a payment vacation.

However, customers have been warned that interest will still accrue while on a payment vacation, meaning many will owe more money in the long run. Borrowers who are in serious financial difficulties have been encouraged to contact their bank for further assistance.

UK Finance’s Stephen Jones said: “Many people across the country are under financial pressure from the coronavirus and lenders are taking decisive action to help them through these troubled times.

“Loan and credit card payment holidays, as well as interest-free overdrafts, can provide much-needed support for those with short-term cash flow pressures, be it to cover next week’s grocery store or next month’s utility bill.”

The city’s Financial Conduct Authority also instructed the banks to offer interest-free overdrafts to all current account customers. More than 27 million accounts now have no fees for using the first £ 500 of their arranged overdraft.

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