Understanding Your Financial Options During the Coronavirus

April 15, 2020 Updated: April 16, 2020

The coronavirus has created a lot of uncertainty for many businesses and households.

Whilst there are millions currently on furlough, unemployed and business owners biting their nails over the next few months, there are a number of financial options available from your bank and providers that can help manage your cash flow more effectively.

Whether you have an immediate loss of income, extra costs or have gone out of business, there are financial options available through a number of government initiatives and financial options below.

Households

One of the biggest areas to save for households is on mortgage payments, where the UK government and banks have agreed to offer payment holidays of up to 3 months.

You will need to demonstrate a loss of income and difficulty in repaying your mortgage as a result of the coronavirus; and that you are not applying as part of a long-term financial issue.

With the average UK household spending £671 on their mortgage each month, this could provide a saving of around £2,100 to the average family.

Tax

The UK has offered VAT and self-assessment tax delays for individuals and businesses who are looking to maintain their cash flow.

This comes after the US agreed to over 90 days of tax-free living and a £1,000stipend to each US citizen.

For many self-employed and small businesses, the ability to defer tax payments will offer a healthy balance short-term.

However, people that claim this should ensure that they have sufficient funds available when their full tax balance could be due and significantly higher, this time next year.

Business Bank Accounts

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For those using business bank accounts, customers can use their overdraft during COVID-19 without incurring any fees.

Currently, this is limited to just £500, however, different terms may apply depending on the bank, your previous payment history, and company turnover.

If you do not have an overdraft, you may request one from your bank and this may be subject to affordability.

If you are looking for the best business bank accounts and looking to save money during the pandemic, look at which companies do not offer any upfront or monthly fees and come with an overdraft facility.

Credit Card Debts

The FCA announced last week that all banks and credit card providers can offer customers the chance to freeze credit card payments for up to 3 months.

This will not impact the individual’s credit score or incur any extra fees, but for many will provide a lot of important breathing space.

The measures include any credit cards and store cards and banks have been told that they cannot suspend cards during this period either.

Whilst the eligibility criteria is not fully certain and will be treated on a case-by-case basis by each bank or provider, this should not be seen as a long term solution and there may not be leniency on people on regularly default on credit card payments.

Outstanding Loans

Part of the FCA announcement confirmed that anyone with outstanding loans may also be eligible for a three-month interest repayment, including personal, guarantor, logbook and business loans.

Customers will equally not have any impact on their credit score or be charged anything extra, but they will still be liable for full repayments and to see through the terms of their loans.

Currently, individuals cannot take payment holidays for peer to peer loans, car finance or payday loans.

Mortgages

With mortgage payments deferred for up to 3 months in the UK, those looking to save on their mortgage can find other options, including remortgaging at a lower rate or getting an interest-only mortgage to save money in the short-term.

There are a number of people worldwide who are desperate to complete on properties, whether they have had their mortgage offer expire or have legal obligations to complete.

During this distressed time, they can look at forms of specialist finance, including bridging loans, which involve borrowing from a non-bank and avoiding the lengthy process that may have been restricted during COVID-19.