Understanding temporary repayment breaks
Overwhelmed by loan payments? A temporary repayment break can help you get your finances back on track.
Overwhelmed by loan payments? A temporary repayment break can help you get your finances back on track.
We know that life can throw unexpected challenges your way. Whether it's job loss, illness, or something else that’s affected your income, a temporary repayment break can give you the time you need to manage your money with confidence.
A temporary repayment break is a short-term arrangement that allows you to pause or reduce your loan payments for a period, typically between one and three months. It’s a way to give yourself some breathing room without worrying about your next payment.
But it's important to know that while your payments are delayed, they’re not cancelled. Interest will keep adding up during the break, and you’ll still need to make those payments later, just spread out over a longer period. So, while it’s a good way to ease short-term pressure, you need to consider the long-term impact.
Payment breaks are available for personal loans, home loans and car loans. But each credit provider has different rules, so it’s important to check with them directly.
A payment break affects your loan in the following ways:
You don’t need to make payments during the break, but the interest on your loan continues to add up. This means that your outstanding loan balance will be higher when the break ends. As a result, your monthly payments might increase because you're now paying off a larger balance. Alternatively, your credit provider might extend the term of your loan, which could help keep your payments the same, but you'll end up paying more interest in the long run.
To make up for the missed payments during the repayment break, your loan term could be extended. This may lower your monthly payments, but the longer repayment period means you’ll likely pay more interest over time, even if your monthly amount goes down.
Once your break ends, you’ll start making payments again, but they could be higher to account for the payments you missed. If your financial situation hasn’t improved, this could make it harder to get back on track.
If you’re approved for a payment break, it won’t impact your credit score. Credit providers typically report a repayment break as a deferral to the credit bureaus, not as a missed payment. If you don't continue regular payments once the break is over it could harm your credit score.
To qualify for a repayment break, you need to meet certain criteria, such as:
Credit providers typically require proof of financial hardship to approve a payment break. Some common reasons include:
Credit providers are more likely to approve a payment break if you’ve kept up with your instalments. If you’re behind on payments, you might not qualify.
Depending on the type of loan you have, you may have more flexibility in applying for a repayment break. For example, if you have a bond, you may have more options than personal loan holders. Check with your credit provider to find out the rules for your specific loan.
During times of crisis (like a national emergency), governments or credit providers may offer temporary repayment breaks through special programmes. If you’re struggling due to an event like a pandemic or recession, you might have access to additional support.
If you think a temporary repayment break could help, here’s how to apply:
Start by contacting your credit provider. Most offer easy ways to apply for a repayment break online or through customer service.
When you apply, be clear about why you need the break. Provide all the details about your financial situation. You’ll likely need to share documents like:
Before you request a temporary repayment break, review your loan agreement. Make sure you understand how it will affect your loan and what the new repayment terms will be after the break ends.
Once you’ve got all your documents you can submit your application. Some credit providers will let you do this online, while others may ask for a formal written request.
After submitting your request, your credit provider will review it and let you know if your application is approved. If it is, they’ll send you the details about your new repayment schedule and when payments will resume.
To speed up the approval process, make sure you have the following documents ready:
A temporary repayment break can be helpful if you're facing financial challenges. It allows you to pause or reduce your loan payments temporarily, giving you some breathing room. While interest still adds up during this time, it gives you short-term relief to help you get your finances back on track.
But a temporary repayment break isn’t your only option for managing debt. You can consider other options, like term extensions, debt consolidation, re-spreading of arrears or restructuring your loan to make payments more manageable. Speak to a financial advisor or credit provider to decide on the best solution for you.