Published On: Mon, Aug 10th, 2020

Credit Cards UK: Lending set to plummet – how this will affect you | Personal Finance | Finance

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While credit cards and personal loans can often provide valuable financial assistance, obtaining these forms of short-term credit during this time, may prove more difficult. Forecasts have predicted consumer borrowing will fall at the fastest rate on record this year. And this is likely to be a direct result of the recession caused by the COVID-19 pandemic which has gripped Britain for months.

Borrowing must be undertaken responsibly in normal times, however with the financial effects of COVID-19 continuing to set in, Britons are urged to think carefully about loans. 

The Money Advice Service website states: “The coronavirus outbreak means this is going to be an incredibly stressful period, because although this is a health-based emergency, it’s also a financial-based emergency too.

“The more you can do now to plan ahead will save you time and energy – and importantly, money– when you might not be feeling at your best.”

It advises Britons to undertake an emergency budget to ensure they are financially safe, and speak to creditors if payments are likely to be missed. 

Payment holidays on credit cards and loans are available until October 31, 2020, for those who need financial assistance.

These must be formally agreed, to avoid being classed as a missed payment.

However, payment freezes should only be taken if they are absolutely necessary for households to get by.

A recent study conducted by OpenMoney shortly before the lockdown took hold of the UK, demonstrated consumer reliance upon credit cards, loans and other forms of short-term credit. 

The study analysed 2,000 people and their financial habits this year.

A total of 34 percent asked said they turned to credit cards, overdrafts and payday loans to cover their essential costs.

And even before the pandemic, financial difficulties were present, with a total of 40 percent of those asked said they had outstanding debt to meet in 2020.

Andrew Morrow, CEO of Open Money, expressed concern for reliance upon short-term credit.

Mr Morrow suggested that with rising household debt, this could prove disastrous for finances, and overall credit rating.

However, it is feared that due to the pandemic, these difficulties could only be further exacerbated. 

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