Nearly 1.2 million payment holidays on credit cards and personal loans have been granted by UK banks for customers struggling with the COVID-19 outbreak.

New figures from UK Finance have shown that almost 700,000 customer accounts have been given a payment holiday on their credit card. with another 470,000 payment holidays agreed on personal loans.

UK Finance says firms have also worked to ensure these steps will not adversely affect customers’ credit files, as taking a payment holiday will not be reported to credit reference agencies as the customer being in arrears.

Lenders have worked with the Financial Conduct Authority (FCA) to help people facing temporary financial pressures due to the Covid-19 outbreak by providing a payment freeze on credit cards and personal loans of up to three months, and offering customers the option of interest-free borrowing on the first £500 of their overdrafts.

In addition, over 27 million customer accounts have been offered three months of interest-free borrowing on the first £500 of their arranged overdrafts if needed. Any overdraft interest waived by lenders during this period will not have to be repaid at a later date.

Consumers have been warned that Interest will normally continue to be charged during payment holidays and so customers should consider their options carefully and only apply if they are facing temporary financial difficulties and need immediate help.

Commenting on the figures Stephen Jones, UK Finance CEO, said “Many people across the country are facing financial pressures due to the coronavirus, and lenders are taking decisive action to help them through these tough times.”

“Payment holidays on loans and credit cards and interest-free overdrafts can provide much-needed support to those with short-term cash flow pressures, whether it’s to cover next week’s grocery shop or next month’s utility bill.”

“A payment holiday may not be the right choice for everyone, and lenders have a range of options to help customers through the Covid-19 crisis.”

“We would encourage any customers concerned about their financial situation to check with their lender, starting by looking at their website which will have the latest information on the support available.”

Dame Gillian Guy, Chief Executive of Citizens Advice, said “The payment holidays provided by lenders have helped soften the financial shock of the coronavirus lockdown for hundreds of thousands of people.”

“However, there’ll be many households needing further help, and more time, to get their finances in order.”

Renters and council tax payers who are falling behind on payments face a cliff edge when a temporary pause on payment enforcement comes to an end.”

“The government needs to take action to make sure people don’t face eviction or harsh debt collection for falling behind on bills due to coronavirus.“