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Can I freeze my loan repayments?

You can ask your loan provider to freeze your loan repayments. Each lender uses their own criteria when deciding whether to freeze interest. But if you are in financial difficulty you are more likely to get your request accepted. This will help you to repay your debt quicker.

5 min read
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Will I be charged to freeze my loan? 

You shouldn’t receive any charges from a lender for agreeing to freeze interest on your loan. The only time you may face a fee is if you use a fee-paying debt management company to request this for you (but this will be payable to them, not the loan provider). 

Can I freeze the interest on my loan? 

It’s best to contact your lender if you are struggling to meet your loan repayments. Every lender will have their own policies, and they’re not obliged to stop interest and charges by law. 

“Most lenders have some flexibility, especially when it comes to customers in financial difficulty.”

Some lenders may agree to freeze interest on your loan for a certain length of time (such as 6 or 12 months for example). Make sure you maintain your payments during this time, otherwise the agreement will break and interest may resume. Once this offer period ends, you can ask them to extend it, if you still have an outstanding balance.

Under the FCA’s guidelines, lenders have to consider freezing interest when customers are in financial difficulty. Lenders are more likely to take your concerns seriously if you provide them with your monthly incomings and outgoings to show what you can/can’t afford.

Also, don’t forget to mention if you have any mental or physical health issues. This means you could be viewed as a customer more vulnerable to financial difficulty, and creditors will usually have different policies in place to help people in this situation.

Alternatively, you could contact charities like Citizens Advice or StepChange who can do the hard work for you. They offer free, non-judgemental debt advice. For example, if you enter a debt management plan, they can ask your creditors to freeze interest and charges for you. You’ll only need to make one monthly affordable payment to them each month. Then they’ll distribute it between your creditors on your behalf. 

There’s no guarantee that lenders will accept your request, even if you go through a debt management company. Having said that, some people prefer to use debt charities because it takes some of the stress away from dealing with lenders directly. It’s important that you understand entering a DMP will show on your credit report for six years if it results in you paying less than the agreed contractual payments. 

Does freezing affect my credit score? 

If your loan is still with the original lender, then getting the interest frozen shouldn’t affect your credit score. 

But if the interest and charges have already been frozen because the account has defaulted and it’s been passed to a debt collection agency, then this will affect your credit score. A default for missed payments will stay on your credit file for six years and can affect your ability to get further credit. This is why it’s important to contact your lenders as soon as you enter any difficulty. 

Can I reduce monthly loan payments? 

You can reduce your monthly payments, but it is best to speak to your loan provider before you do so. Interest and charges can be applied and your credit score can be affected by making reduced payments. It can also trigger unwanted debt collection contact from your loan provider if you don’t forewarn them. So it’s wise to get in touch with your lender to explain your situation before it gets any worse. 

They will usually want a list of your incomings and outgoings as evidence that you are in financial difficulty. Again, charities like StepChange can negotiate on your behalf. 

Just remember that paying less than the minimum amount can affect your credit score and reducing your monthly loan payments will extend the time it takes to repay your debt. 

Also, debt management plans only include unsecured debts (not secured loans, hire purchase agreements or mortgages). You need to maintain full payments towards secured debts or you could risk losing your assets. 

Can you defer a loan payment? 

Depending on your lender, you may be able to defer a loan payment and take a temporary ‘payment holiday’. This break can temporarily relieve some financial pressure in an emergency situation (e.g. a broken boiler or a car repair). Your repayment term will usually be extended in light of the payment break. 

You will need to check the terms of your agreement with your loan provider to see if this is something they offer. Lenders may check your financial circumstances before they agree to a payment holiday. 

Before you go ahead, bear in mind that missing a payment may affect your credit score, and your ability to get credit in the future. And your balance may continue to accrue interest in the meantime. So if you can afford not to take a payment holiday, then don’t. 

What happens if I can’t freeze my loan? 

If you feel like you’ve been treated unfairly by your loan provider, you can raise a complaint to get them to investigate the matter further. 

Also mention if you’ve been charged too much interest in the past. Especially if your balance has increased with interest and charges. This will have kept you in financial difficulty for longer, so you might be able to get a refund. 

You should consider reviewing your outgoings to find ways you can cut back on spending. Then you can put any extra savings towards your loan repayments, which should make them more affordable.