What happens now that your payment holiday is over? What happens once your 3-month payment holiday ends? Consider a debt consolidation loan to avoid affecting your credit score negatively.
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Bayport Blog

What happens now that your payment holiday is over?

Published: July 13, 2020
Categories: Debt Relief
Tags: Consolidation Loan, Debt Consolidation, Debt Management, Debt Relief, Debt Restructuring

The 3-month payment holiday that banks and credit providers offered their customers was a lifeline for many people. But as you come to the end of this period, it is time to look at your complete money picture and consider the debt solutions available to you.

A payment holiday means that for the period agreed with your credit provider (usually three months) you don’t have to pay your monthly loan instalments. Because it is an agreement with your credit provider, there are no penalties on these missed payments and they don’t influence your credit score.

The downside, however, is that in most cases the credit provider will keep adding interest and monthly admin fees to the outstanding balance on your loan. As a result, not only will your loan term be three months longer than originally agreed, but your debt will cost you more because of the interest and fees that accrued during the payment holiday.

Against this backdrop, your first step should be to fully understand the status of your loan at the end of the payment holiday. Give your credit provider a call or send an email to ask for a detailed explanation of your outstanding balance and how much longer your loan term has become.

Get this information for all your loans, and then go back to your budget. Plug your new loan information into your planning, and then take the time to consider all your expenses again. You need a complete and accurate picture of your finances before you decide on the way forward.

Here are some of the debt solution options you could consider:

  • If your job has stabilised and you are again earning your full income and you have trimmed down your expenses, do your best to pay a lump sum into your loan account to reduce the balance and get yourself at least back to the position you were in before lockdown. This could save you a significant amount of money in interest and admin fees, and bring your loan term back to what it was originally.
  • If you are still under financial stress, contact all your credit providers to see if you can restructure your debt so that you can afford the monthly repayments. Do everything you can to avoid missing payments or paying late. Remember, every missed or late payment reflects on your credit record and lowers your credit score.
  • If you have multiple loans, debt consolidation could be the way to go. Once you have compiled your full debt picture, get in touch with a credit provider such as Bayport to discuss your debt consolidation options. If you can borrow money to pay off all your debts, leaving you with only one instalment for a loan with a lower interest rate, the benefits to your cash flow are significant. In addition, credit providers are often willing to negotiate a settlement discount in exchange for a full and early settlement of a loan. This will mean that the amount you borrow for your consolidation loan is less than the sum of all your outstanding debts. It is very important, however, to make absolutely sure that the consolidation loan does cost you less over its full term than what it would have cost you to just keep paying your original loans.

It is going to be tough for most of us to regain our financial balance while we are still dealing with Covid-19, but we can do it by sticking to healthy money habits and making smart money decisions. One of the smartest money decisions you can make at the end of a payment holiday is choosing the debt solution that best meets your needs.

For more information on personal loans, visit https://www.bayportsa.com/products-services/personal-loans-online/

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