Payment holiday

We recognise that some of our customers could experience financial difficulties in the coming weeks due to coronavirus-related disruption.

We will work with each customer on an individual basis to assess what help is available to help them manage their finances.

We would encourage any customers who think they may be affected to contact us as soon as possible using the below form:

  • Important: We will consider all requests for payment holidays and will respond within three working days.  Please do not cancel any Direct Debits you have set up in relation to your finance agreement with Al Rayan Bank.

Important information about payment holidays

Will a payment holiday cost me more in the long term?

Payment holidays are designed to provide short term assistance to customers in immediate financial difficulty by reducing their payments to £0.01 per month over a three-month period. A £0.01 payment is taken so that when we return to normal payments, we don’t need to take the customer through a process to set up a new Direct Debit.

Customers who choose a three-month payment holiday should be aware that their payments will be higher than they would have been if they had not chosen a payment holiday, once the payment holiday period is over.

This is because after the payment holiday has completed, the finance that has not been paid will be added to the total outstanding balance. This increased finance balance will then be used to calculate the rent that the customer pays to the Bank and the acquisition payments they will need to make to acquire the Bank’s share of the property, over the remainder of the finance term.

Therefore, if you do take a payment holiday the overall amount that you pay to the Bank will be higher over the remaining finance term than if you do not take a payment holiday.

The following examples demonstrates how this would work in practice:

Example One

  • Finance type: Rent and acquisition
  • Finance amount: £120k
  • Rental rate: 3.50%
  • Finance term: 240 months (20 years)

In this scenario, a customer taking a three-month payment holiday will pay an additional £807 over the remaining 20 years, compared with what they would have paid had they not taken the payment holiday.

Example Two

  • Finance type: Rent Only:
  • Finance amount: £100k
  • Rental rate: 3.50%
  • Finance term: 240 months (20 years)

In this scenario, a customer taking a three-month payment holiday will pay an additional £605 over the remaining 20 years, compared with what they would have paid had they not taken the payment holiday.

Please note: the above examples are indicative. Each customer’s payments will depend on the rental rate of their product, the overall finance amount, the finance term and any future changes to the rental rate.

The confirmation letter we send you will provide an indication of how your monthly payments may change in the future.

How do I reduce my monthly payments after the payment holiday?

Customers can continue to make additional acquisition payments after the end of the payment holiday in line with the terms of their account. These additional acquisition payments can be used by customers to reduce the monthly acquisition payment or shorten the overall finance term.

Whilst there are existing conditions about when you are able to make an additional acquisition payment, customer who have made use of a payment holiday will have more flexible terms than usual:

  • Customers wanting to make additional acquisition payments after a payment holiday will not pay the usual £25 additional acquisition payment administration fee
  • You will also be able to make a payment anytime, and do will need to wait until an additional acquisition payment month
  • You will be able pay as little as £250, rather than the usual minimum £4,000
  • You will also be able make an additional acquisition payment even where they are subject to a fixed rental rate
  • And you can make additional acquisition payments greater than the balance of the payment holiday.

These temporary rules will expire 31 December 2021

I am a commercial customer. Can I apply for a payment holiday?

Payment holidays are currently limited to retail HPP and BTLPP customers. If you are a Commercial Property Finance customer and you are concerned that coronavirus related disruption may affect your ability to make your payments, please contact your Relationship Manager to discuss your requirements.