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Managing your debts

Debt can be stressful at the best of times, let alone in uncertain times like these.

If coronavirus has affected your income and you’re wondering how you’ll manage existing debt, here are some tips to help.

1. Get assistance

If you’re an HSBC customer and think you’ll struggle to keep up with repayments in the coming months, there are several ways to get some breathing space. 

You can take a payment holiday on mortgages and credit cards, or defer repayments on loans, for up to 3 months if your finances have been affected by coronavirus. And, on many current accounts, you can apply for 3 months’ temporary arranged overdraft support, until 31 October.

Find out more about these temporary measures for HSBC products:

Other lenders should be offering similar measures. If you’re worried about making a payment, contact your lender before it’s due. It may be simpler to do this online, as most banks will be experiencing high call volumes.

Long-term credit card debt

The Financial Conduct Authority (FCA) has asked all lenders to be more flexible with customers in persistent credit card debt. 

Normally, if you’ve been in debt for 36 months, and typically make low repayments, your lender would contact you to offer you ways of repaying your debt quicker. Then, if you didn’t respond, or increase your repayments, they had to suspend your card. 

Under the FCA’s new, temporary, guidance, you should get more time – until 1 October 2020 – to respond to your lender before they suspend your card.

Consider your credit rating

If you take a mortgage or credit card payment holiday, or a loan repayment deferral, it won’t impact your credit rating. That’s assuming you resume making payments once the holiday, or deferral, period ends.

For the time being, the FCA has also told lenders not to start or continue repossessions, regardless of what stage they’re at. 

Your credit rating may be negatively affected if you miss payments without being on an agreed payment holiday, or loan repayment deferral. So speak to your lender if you think you might miss a payment.

If you’re concerned, you can check your credit rating to make sure there are no mistakes.

2. Draw up an emergency budget

This is also a good time to review your expenses and create an emergency budget. You may find areas you could cut back on spending, such as memberships and subscriptions, or a cheaper energy supplier. 

If you’re thinking about borrowing more to cover essential costs in the coming months, it’s worth looking at other options first, which may reduce your need to borrow.

For example, if your income has been affected by coronavirus, there may be Government support available. And you may be able to get help with any bills you’re struggling to pay, including Council Tax.  

3. Consider debt consolidation

If you have multiple debts, it may be possible to make them easier to manage. A debt consolidation loan combines all your debts in one place, giving you a single monthly repayment and interest rate.

First, though, it’s important to check whether a debt consolidation loan would save you money in interest. You should consider not just the interest rate and monthly repayments, but also the term of the new loan compared to the remaining term of your existing loans/debts. 

Spreading your payments over a longer term means you could end up paying more overall than under your existing arrangements, even if the interest rate on this new loan is less than the rates you are currently paying.

See how debt consolidation loans work.

Get more help

If you’re still worried about managing your debts, there are plenty of places to find help. 

It’s easy to get in touch online. Talk to us directly through our chat channels.