The Coronavirus pandemic has sent shockwaves through the global economy, making it harder for many people to access the credit that they need. Getting all kinds of credit from mortgages to credit cards has become harder as the world struggles to come to terms with Covid-19 and faces a recession. One credit broker said that the number of loans and cards available to consumers has fallen by over half. Lenders are becoming increasingly averse to risk and withholding funds from people who may not be able to repay debts. Nonetheless, credit may well be available to you if you seek out the right source.
Will I be offered credit whilst the pandemic continues?
You are more likely to gain access to credit if a lender feels very confident you’ll be able to pay it back. Many lenders have been raising interests in order to claw back some of the losses they have experienced throughout the pandemic. Rates do tend to rise whenever lending becomes riskier than normal. If you are concerned about your credit score, you may be able to find out whether you are eligible to borrow without going ahead with a full application which could impact your credit score.
0% interest deals
0% deals on credit cards and loans have become much harder to come by over recent months. Even if you do see a 0% interest offer, chances are that interest will be frozen for a shorter period than normal. You will also need to watch out for balance transfer fees, which mean you are charged when you move debt from one card to another.
Will payment holidays affect my ability to borrow?
Many borrowers have taken advantage of payment holidays during the pandemic, but these do come with pitfalls attached. If you take a payment holiday without it being officially agreed to by your lender, this could affect your credit score. Even if your score is unaffected, lenders may ask you if you did take a payment holiday or a furlough payment when they assess your application. This helps them to get a more complete picture of your financial situation.
Mortgages in the pandemic
When it comes to mortgages, products have become much harder to access. Lenders are increasingly concerned about house price falls. This means you are more likely to get a mortgage if you can offer up a sizable deposit. Although you could previously obtain a mortgage with a 10% deposit, some lenders have been asking borrowers to stump up 15% or more.
Short-term borrowing options
Options may be available if you need access to finance on a short-term basis. A payday loan provider (that is, websites like Wonga) may help you meet your temporary needs. While these have their place, they should be regarded as a last resort and definitely a double-edged sword if you can’t make your repayments comfortably. If you do need to make an unavoidable purchase such as a car or household appliance, you may be offered a buy now pay later. Remember, this will show up on your credit score, as will any payments that you miss. This is why it’s important to be confident that you will be able to repay the money before you go ahead and borrow.
Are borrowers holding back or pushing ahead with applications?
Online and offline lenders have been tightening their belts throughout 2020. Now more than ever, it’s important to show that you will be able to repay anything that you borrow. Whilst online lenders are more hesitant to dish out finance, many borrowers have become more reluctant to take out credit, instead choosing to sacrifice everything other than essential purchases. Not only are some borrowers worried about their ability to pay the money back, but they are also more eager to protect their credit score in case they need to source finance in future.
Nonetheless, you may still be able to enter into an agreement with a loan provider if it’s likely you can repay the money and are still generating a steady income.